OPINION: RIIO2 must deliver skills resilience for energy

There is a gap at the centre of energy skills strategy. It needs a strategic approach at least equal to the industries that rely on it, says Nick Ellins, Group chief executive and chief executive of the National Skills Academy for Power Energy and Utility Skills Group

 

In its consultation on RIIO 2 and plans for the networks, Ofgem says “Ideally, it would be possible to establish a measure of workforce resilience as we have established for network resilience. This would enable Ofgem to hold companies to account for maintaining and sustaining the skills they need to operate effectively.”

We could not agree more. This has been a critical resilience omission for the energy industry for some time. The responsibility rests with Ofgem to make sure that companies do face this head-on – because there is a total absence of infrastructure policy cover.

The regulated energy sector is a sector of critical strategic value to the UK and you might expect that any government risk exercise would surely have them as a priority. Somehow, that is not the case for energy or for water – although both are mission-critical sectors.

Currently, every major business sector in the UK is publicly reporting difficulty in accessing the skilled workers they need at a price they can afford. The energy sector must be able to compete effectively and win the battle for talent if it is to be efficient and affordable – and secure the levels of innovation and customer service needed.

We need coherent cross-UK action on labour market sustainability, workforce resilience, productivity, migration policy and many others. Yet while the pivotal labour market mechanisms and policies sit in the Department for Work and Pensions, Home Office and HM Treasury, the responsibility for solving workforce resilience and skills sits with education and skills departments and is a devolved policy matter.

The four nations’ policy makers have differing and often opposing views, with each party responsible for their piece of the puzzle, but with no duty for how, or even if, one piece connects to the next. No one body provides stewardship to ensure the pieces come together.

England is a case in point. The Treasury’s Apprenticeship Levy mandates a UK-wide hypothecated tax on qualifying employers from all four nations. It then enables just England to use the system the policy was built around, in the form of the ambitious Trailblazer Apprenticeships system.

That Trailblazer system was designed by education and skills department officials around 15 professional routes. Based on job volumes rather than econometric criticality, hair and beauty, catering and hospitality and creative and design all have routes. But this regulated utility sector – which powers the nation and is the largest single contributor to the £0.6 trillion National Infrastructure Plan – has no route.  Skills officials remain totally unsighted on the strategic priorities of the utility sponsoring government departments, and vice versa. Utilities, and their critical supply chain, fall between other sectors – housing, construction and engineering and manufacturing.

The UK Industrial Strategy might be expected to fill the gap, with the Secretary of State for Energy also the Business Secretary, and two of the strategy’s five pillars being ‘People’ and ‘Infrastructure’. But should you read the People chapter, you would see England-only initiatives pitched as UK solutions. None encompass the utility infrastructure strategies or policies of any of the four nation’s governments and regulators.

The power, gas, water and waste industry has come together to seek change, co-ordinating tightly with its main stakeholders.

We see no evidence that Ofgem can rely on other government policy frameworks to protect the sector’s efficiency, productivity, workforce resilience and sustainably. Specific resilience action is needed by the regulator with duties to the sustainability of the sector, through the RIIO-2 framework.

Ofwat reacted first, placing workforce resilience squarely in its PR19 ‘resilience in the round’ price-setting principles, with companies encouraged to act in concert.

Now comes Ofgem. Its RIIO2 principles are in consultation now and the entire energy sector needs the regulator to hold its nerve in recognising the labour market challenge.

Energy and Utility Skills has worked with Ofgem to try to ensure this key resilience issue is included in RIIO planning so the regulator can holds companies to account for maintaining and sustaining the workforce access and skills they need. Ofwat’s approach to ‘resilience in the round’ is a good model and a similar approach to enshrining workforce resilience in RIIO-2 would provide direct policy read-across and productivity benefits to the National Infrastructure Plan.

We think there is an unanswerable case for Ofgem to make ensuring workforce resilience a definite requirement in RIIO2. Once that is achieved, real measures of success can be defined. We are ready to help develop them.

First published in the February 2019 issue of New Power Report

Further reading

Don’t let Brexit lead to offshore skills shortage, MPs warned

Women in power: abstracts from interviews published in New Power Report

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