IEEE Power & Energy Magazine - November/December 2017 - 116

in my view

Mark Ahlstrom

new skills needed
structural transformation in the electricity industry

M

MY LOCAL NEWSPAPER INTER-
viewed Fatih Guvenen, a University of
Minnesota economist, about a new ana-
lysis of the lifetime earnings of Ameri-
can workers. The study was done for the
National Bureau of Economic Research
and clearly shows that the market for
workers has irreversibly changed in ma-
jor ways. In the interview, however, I also
found clear messages about structural
transformation that apply to the electric-
ity industry.
The jobs of 200 years ago were based
on farming and trade; there were almost
no manufacturing jobs. There was a ma-
jor structural transformation as manu-
facturing jobs became the norm, and
this resulted in significant gains for men
entering the job market (and, to a lesser
extent, for women as well). However, for
the average male worker of age 25, the
inflation-adjusted wage level peaked in
1968 and has been falling ever since.
The data make it clear that all developed
countries are well along in another ma-
jor structural transformation with huge
ramifications for workers and indus-
tries-the decline of manufacturing and
the rise of services. Jobs in manufactur-
ing, mining, and farming are not com-
ing back.
An analogous transformation is un-
derway for the electricity industry, and
as with the job changes in the transfor-
mation from a manufacturing to a ser-
vices economy, the transformation in
Digital Object Identifier 10.1109/MPE.2017.2729218
Date of publication: 18 October 2017

116

ieee power & energy magazine

the energy economy requires a differ-
ent skill set. Gone are the days when
utilities could put most of their efforts
into building "big iron" resources, such
as large factory-like power plants that
manufacture electricity. Future power sys-
tem jobs will be much more about soft-
ware and services, communications and
system optimization, and other new skill
sets that are radically different.
These transformations to a services
economy have large impacts on our edu-
cation systems and society, and they also
have huge impacts on the electric utility
industry. Demand for power is largely
stagnant. The good news for utilities is
that overall electricity use is likely to
grow dramatically as we electrify more
of our overall energy use from other
sectors such as transportation. The chal-
lenge for utilities is that this will be a
new world based on services and cus-
tomer interactions, and there will be
many new competitors.
When I started to write this column,
the idea was to discuss whether renew-
able energy had arrived yet and if it
was becoming mainstream. Looking at
events since the previous special issue
on renewable energy integration just
two years ago, this question already
seems completely out of date. The cost of
wind energy has fallen to levels where,
for much of North America and the
world, wind plants are now the cheapest
source of new generation for providing
energy. From a more expensive start-
ing point, the cost of photovoltaic solar
power has fallen to the point where it

is now the cheapest source of new on-
peak generation. Already in some states
and countries, the challenge is more
around having too much energy during
the working day, to the point that we
must alter customer behaviors or build
large-scale storage systems to deal with
excess generation.
Without doubt, renewables are main-
stream and continue to be a major cata-
lyst of change, not just in the electricity
sector where the impacts are huge but
through our service economy in general.
Another factor that has been difficult for
both utilities and regulators to grasp is
that while cost does matter, this trans-
formation is just as much about custom-
er preference. Just as many customers
now go out of their way (and often will-
ingly pay a premium price) for groceries
that are organic or raised locally, cus-
tomers for electricity are now choosing
to purchase their electrons from specific
types of clean energy sources or from
their own rooftop.
Utilities should work hard to provide
customers with the flavors of electric-
ity that they want. But they must work
even harder to remain as the preferred
provider of platforms and services for
this transformed world. Similar to other
industries like telecommunications,
photography, and music that have al-
ready been changed forever, the utility
industry is undergoing a digital trans-
formation. This is visible in the charac-
teristics of our power plants and loads,
(continued on p. 112)
november/december 2017



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