LSP RENEWABLES Q4 2024 DIRECTORS REPORT
Welcome to the final edition of the LSP Renewables Quarterly Directors Report for 2024, an opportunity to reflect on Q4 and share our findings and market insights.
In this quarter's instalment, we are excited to showcase the perspectives of our Founder and CEO, Adam Grainger, providing an in-depth overview of the Renewable Energy Landscape in the fourth and final quarter of 2024 and looking forward to what we can expect to see in 2025.
2024 Overview
2024 was a turbulent year for the Renewable Energy industry. Declining investor confidence, fuelled by rising inflation, supply chain risk, economic and political uncertainty, grid upgrade delays and permitting bottle necks, has caused many global renewable energy investors to hit the brakes on longer term DEVEX and focus on maximising returns from existing assets and only proceeding with near term projects with the most robust of investment cases.
Global conflicts, financial markets slowing down, political uncertainty, and increasing global interest rates and inflation combined to contribute to a reduction in long term market confidence and an increased focus on delivering near term shareholder value.
This has been most prevalent in offshore wind, where cost and therefore risk are among the highest in the Renewable Energy sector. Margins and confidence have been squeezed sufficiently so that many longer-term projects are deemed at best risky, and at worst unviable. Turbine manufacturers have slowed investment in future generations of their turbines, instead focusing on fulfilling secured orders and upgrades on existing fleets.
All of this has had an inevitable impact on recruitment in the sector. What began as words of caution at the tail end of 2023 with some headcount growth projections reducing a little, has now gathered pace and manifested in to hiring freezes, and more recently wholesale redundancies. While here at LSP we have seen a marked slow-down in permanent hiring across the offshore wind sector, the contract hire market has boomed as the industry looks to deliver projects in the short-term, utilising contract hire resources while remaining reluctant to take on additional permanent hires for the long term.
Markets are cyclical and this is very much a natural correction following what had been a period of unprecedented growth within our sector. The economic environment that underpinned and supported the rapid growth of renewables over the past 10 years has reached the end of its cycle and a new way forward must be found.
This natural correction many will say is somewhat needed. It will allow the industry the time to consolidate, upgrade grids, develop better long-term storage solutions, focus on standardisation across the supply chain, learn some lessons, mature, and de-risk a little. It will allow governments time to improve regulatory, planning and permitting practices. Most importantly it will allow the global population the time to continue its adjustment and become more comfortable with the inevitable truth, that the world needs to tackle climate change, remove polluting hydrocarbons from existence, and transition to an electrified world powered by renewable energy.
The resurgence of fossil fuel profits, particularly due to volatile energy prices and geopolitical conflicts, may shift investment focus back to conventional energy sectors in the short-term. Publicly traded renewable companies have faced stock price volatility, making it harder for them to raise and therefore deploy funds. The inevitable transition to a greener future will continue. The move is being driven (in part) by the many geopolitical conflicts around the world, with countries seeking to reduce their reliance on foreign nations to meet their energy demand.
Other Markets
Other renewable energy markets such as Solar and BESS have fared considerably better than offshore wind. That said, solar installations in Europe increased by only 4% in 2024, a significant drop from previous years of double-digit growth. This slowdown poses challenges to the EU's renewable energy targets.
Never-the-less I believe BESS combined with Transmission and other long term storage solutions such as Hydro will be the renewable energy markets that will deliver the most growth in permanent employment opportunities in the near-term. The offshore wind contracting market will remain strong, as countries around the world push ahead with building pre 2030 projects to meet their climate commitments. However, it may take a year or two before confidence returns, and we start to see the permanent hire market recover and the development pipeline grow once more.
Governments and Transmission System Operators around the world are investing in and upgrading energy systems to cope with more variable renewable energy generation and our projected increased electricity needs. Over the next 5-10 years we will see wholesale changes to our Transmission networks and the levers that incentivise and remunerate generators to meet our energy demands, while keeping the grid in balance. This will present opportunities for generators, new technologies, and storage solutions over the coming years, and I anticipate this will be where the most demand for new skills and employment will derive from.
Once our transmission and energy storage systems are more robust and better equipped to meet the demands of the future, we will then be able to truly deliver on our net zero ambitions.
Employment Trends & Skills Shortage
Renewable energy employment rose from 13.7 million jobs in 2022 to 16.2 million in 2023, indicating a robust expansion in the sector. Asia continues to dominate renewable energy employment, accounting for approximately 63% of the global total. China, in particular, leads in job creation within the sector. The solar PV industry remains the largest employer within the renewable sector, driven by substantial capacity additions worldwide.
The job growth in the renewable energy sectors has significant implications. Firstly, it contributes to economic growth by creating new job opportunities and stimulating economies. Secondly, increased employment in renewable energy can lead to a reduction in greenhouse gas emissions, supporting global climate goals. Lastly, as more individuals enter the renewable energy workforce, there will be a shift in public perception towards the importance of renewable energy solutions, potentially influencing policy decisions and investments.
As of today, a growing number of young people are choosing careers in renewable energy and beginning to learn the skills that will be needed to meet the challenges of the future. However, according to the International Energy Agency, the numbers of workers pursuing relevant degrees is failing to keep up with growing demand. While there is optimism that in time, the skills gap can be met, right now we face a global skills shortage, particularly in regions like the UK, where the shortage of skilled workers threatens to impede progress in the energy transition.
One obvious source of skilled workers could be the World’s Oil and Gas industry, which is now declining by around 12% a year. The Energy Transition Institute, based in Aberdeen, estimates that 90% of those working in offshore fossil fuels have potentially transferable skills to offshore renewables. Differences in working practices and accreditations makes the transition perhaps more difficult than is necessary. More must be done to remove obstacles and promote the growth of our sector.
In the interim the skills gap and competition for scarce resources is driving strong wage growth across the renewable energy employment landscape. In my 16 years in the sector, wages have more than doubled. Many industry workers would say this is a good thing! However, rising costs of employment will play its part in increasing the cost of developing and delivering renewable energy projects, and perhaps further damage investor confidence. A balance must be struck for the industry to deliver a sustainable and secure energy future for us all.
Thank you for reading!
If you have any questions regarding this report, would like to discuss any recruitment needs or to discuss more specific industry insights within renewables, please feel free to contact Adam as per below or visit our website - www.lsprenewables.com
Phone - +44(0)203 905 6262
Connect with Adam on LinkedIn