Who Will Replace Power's Aging Workforce?

    December 3, 2014 9:40 AM by Russell Ray, Chief Editor, Power Engineering magazine

    Every sector of the energy industry is expected to lose a large share of its work force as millions of experienced professionals, baby boomers born between 1946 and 1964, become eligible for retirement over the next few years.

    By most accounts, the power sector will need more than 100,000 new skilled workers by 2018 to replace those retiring workers. But attracting new talent has become an arduous undertaking as the industry faces a shortage of qualified workers and increased competition for college graduates.

    The Nuclear Energy Institute estimates that 39 percent of the nuclear workforce will be eligible for retirement by 2018, which means the industry must hire 20,000 new workers over the next four years to replace them.   

    Is the power generation industry prepared to compete with other industries for a new generation of skilled workers? What’s more, does the industry have a plan for training and knowledge sharing?

    There are about 78 million baby boomers in the U.S. They represent 28 percent of the U.S. population and 68 percent of the existing work force.

    About 40 percent of the work force at America’s electric and natural gas utilities will be eligible for retirement in the next five years. About 20 percent are eligible now. Who’s going to replace them?   

    According to the Department of Labor, as much as 50 percent of the nation’s utility workforce will retire in the next five to 10 years. The challenges associated with replacing the technical and institutional knowledge of these professionals will be significant. Hard decisions must be made soon to preserve intellectual property for the future.

    To further illustrate the sense of urgency, here are some eye-opening statistics compiled by the Center for Energy Workforce Development, a nonprofit consortium of electric utilities and associations:

    ·         Almost 62 percent of utility employees have the potential to retire or leave over the next decade

    ·         Nine percent are “ready to retire now” based on current retirement assumptions

    ·         By 2015, 36 percent of employees in positions that the industry deems as critical may retire or leave for other reason and another 16 percent will exit by 2020

    The good news is the industry is forming partnerships with universities and other organizations that are designed to tap the nation’s pool of talented younger workers. The bad news is electric utilities are losing workers at an increasing rate, according to a report from PricewaterhouseCoopers.

    The voluntary turnover rate at electric utilities rose from 3.9 percent in 2010 to 4.9 percent in 2012. For high performers and tenured employees, the turnover rate increased from 2.7 percent in 2010 to 3.7 percent in 2012. The 2013 report also found that the turnover of utility employees during their first year was significantly higher, rising from 2.3 percent in 2011 to 5.5 percent in 2012.

    “This has created a turning point for utilities precisely because they have had so many decades of stability,” the PwC report found.

    Other industries are better equipped to retain employees, the report found. Electric utilities should rethink their approach to employee retention “as they confront the increasing turnover of newer and high performers, as well as the accelerating loss of experienced employees due to retirement.”

    As the economy improves, PwC expects that first-year turnover at utilities will continue to increase, and so will the cost. “If we assume, for example, that for every 1,000 new employees, 100 or so leave, at a cost of $2,300 to $3,600 per hire, that translates into significant cost – not to mention productivity losses,” the report found.  

    The growing number of retirement-eligible employees, rising turnover costs and the generational shift in utility personnel are driving a loss of productivity in the power sector, according to the report.

    “Traditional ‘word-of-mouth,’ on-the-job training of utility workers is not sustainable,” the report said. “More than ever before, work processes and procedures should be documented and continuously improved.”

    Some utilities are encouraging older employees to delay retirement or to remain as contractors to mitigate the exodus of experienced personnel. But this approach can lead to bigger problems because it discourages innovation, the report found. Older, more experienced workers are less likely to push for change because there is not enough incentive to offset the risk to themselves.  “Why, for example, would a worker who’s been successfully doing things ‘my way’ for 20-30 years change tack now, particularly if he or she only has a few more years until retirement or is back on the job as a contractor?” the report asked.

    Establishing a program for transferring knowledge is an essential element for dealing with “brain drain.” Veteran utility workers tend to pass valuable institutional knowledge orally, rather than documenting and updating the information systematically. This intellectual capital is often lost when the worker retires because there is no formal program to capture their know-how.

    Utilities across the country, including Spokane, Washington-based Avista expect to have job openings for engineers, computer technicians, managers, lineworkers and other skilled utility workers in the next five to 10 years. The Spokesman-Review reported that at least 25 percent of Avista’s 1,600 employees will be eligible for retirement within five years. By 2024, that figure jumps to 40 percent. 

    If you have a question or a comment, contact me at russellr@pennwell.com. Follow me on Twittter @RussellRay1. 

Russell Ray

The Power Points blog, written by Russell Ray, Editor-in-Chief of Power Engineering, covers all forms of power generation, including coal, gas, nuclear and renewable. It examines a wide range of issues and advancements in pricing, policy and technology. You can follow Russell on Twitter @RussellRay1.

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