Last year was very interesting and eventful for the energy industry. The highlights include Japan’s fundamental shift in nuclear policy, the war in Ukraine, LNG shortages and record energy prices, a pause on Japan’s offshore wind auctions after a shock Round 1 result, as well as a major spotlight on co-firing with hydrogen and ammonia. Now, let’s take a look at what effects these events had on the talent market here in Japan.
Continued growth in renewables
The renewables sector as a whole continued to grow. Though markets such as PV solar saw some consolidation, demand for talent was driven by growth in energy storage, EV charging infrastructure and wind power. As has been the case for the last 10 years in Japan, demand for quality talent outstripped supply, leading to greater than 30% of all job changes within renewables involving people joining from other sectors. The biggest ‘transfer’ areas were:
Electrical engineering skills remain in high demand due to bottlenecks in grid connection, as well as a trend for higher-volume, smaller capacity power plants. Increasing realization within the industry about the need for quality asset management and operations & maintenance (O&M) was also a catalyst for rising demand. We’ve seen people from telecommunications, railways and power utilities moving into this area.
Structural and mechanical engineering talent was also in high demand for wind power, especially as for those with marine engineering experience. There was a clear need for people with experience in shipping or floating facilities in the oil & gas exploration space to move into offshore wind projects.
PV to ESS shift
What do PV and energy storage have in common? A need to acquire land, work with local stakeholders, get permits, grid connections and prove a strong investment case for the people who control the money. As the PV market becomes more competitive and margins shrink, talent with a strong track record in this market shifted to developing ESS projects. This set off both internal job switches and moves to a new company.
Project finance professionals with general infrastructure experience, such as airports, highways and hospitals, are getting tapped to work in renewables at an increasing rate. That’s because the size, complexity, risk and capital requirements of renewable energy projects are increasing. Those with corporate M&A experience are also seeing increased interest from energy chiefs.
More traditional and private equity investors are launching sustainability and infrastructure funds. This is partly due to consolidation in the PV market, driving a trend for investors to target acquisition of portfolios or equity investments into successful developers, rather than taking an asset-focused greenfield approach that was predominant under the high FIT schemes of old.
Offshore wind: We need a strategy!
Following the shock Round 1 result with Mitsubishi Corporation-led consortiums winning all three auctions in late December 2021, many in the industry were furious. Whereas previously there was a heavy focus on local stakeholder management and development work, industry players noted that local engagement scores would not be sufficient for success in future rounds. In addition to this, METI paused Round 2 auctions to review the criteria, and industry players were keen to lobby and influence the direction of these changes to suit their strengths.
As a result, we saw a heavy demand for strategic positions in Regulatory/Government Affairs, Bid Management and Strategy, and Partnership Strategy that were not heavily apparent in 2021. Those with prior experience in the public sector (especially ex METI/ANRE officials), as well as strategic consultants who had experience supporting Round 1 bids, were in high demand from the developer side as industry players looked to better position themselves for success in Rounds 2 and 3.
Mid-career hiring ramps up
Traditionally, large Japanese banks and trading houses primarily hired new graduates, trained and rotated them around the business to become well-rounded employees. But over the last few years, we’ve seen two changes that are pushing these big industry players to increase mid-career hiring.
The first is an increased departure of top talent in middle-management levels. As large foreign firms have increased investment into Japan and APAC markets, talent from large banks and trading houses has topped the list for many new suitors. In the early 2010s, most people did not leave their large employers until after 40 years old. Now we’re seeing an increasing number of talented people jump ship in their late 20s and early-mid 30s.
The second major reason is a shift in investment sectors, which has revealed a shortage of talent in these niches. As the volume of deals in more traditional infrastructure areas slow and less money flows into power / oil & gas, Japan Inc is turning to decarbonization tech, such as CCS/CCUS and DAC, and digital tech, such as VPP, ESS, and V2H systems. These areas lack experience people, so we’re seeing more mid-career hiring there. Notable examples are the major trading houses poaching talent from technology OEMs and major EPC players.
Outlook for 2023
Moving forward for 2023 we expect to see the above trends to accelerate. Though there’s a huge resurgence in interest for nuclear power, and heavy public and industry support for clean fuels and co-firing, on the talent side we see little impact. The reason for this is that skills required in these areas already exist among the staff of major market players.
LNG traders can easily shift to hydrogen and ammonia; investment talent in major trading houses can be repurposed to find new partnerships; and the power utilities and major manufacturers have retained a lot of talent in the nuclear sector. A trigger point there, however, could be more serious progress in developing new nuclear tech such as SMRs. That could throw an interesting curveball into the hiring market.
Andrew Statter is Partner and Head of GreenTech at Titan Consulting in Tokyo.