S4S3 - Renewable energy

Why are some regions and countries better at stimulating competitiveness, productivity and economic growth?

One of the main goals of the European Union is to reduce disparities in the level of development between regions. And this is not happening. Within countries, some regions are growing faster than others. They have dynamic businesses and innovation clusters, and they develop and commercialise internationally significant products and services – while others do not.

Could other regions and countries replicate the same model and achieve the same result?

The EC believes that these approaches to economic growth and competitiveness are replicable – and developed an approach and a tool to support each region in identifying their own competitive advantages. They called the approach Smart Specialisation. Today, many countries beyond the EU have adopted smart specialisation in their national or regional development strategies.

Skills for Smart Specialisation

While smart specialisation is primarily about the economics of specialisation, VET and skills are the engine that drive smart specialisation. The reason why the ETF set out to develop a methodological approach, Skills for Smart specialisation, in 2019, is that regions and countries that have the right skills are able to certain things better. They are able to:

1. Produce more
2. Produce more complex products and services
3. Innovate and make new products or develop services that are not yet available
4. Industries are related through their skills. Industries that enter a region are often related to the region’s current industries. Vice versa is also true. Industries that exit a region, tend to be unrelated to other industries in the region. This is because industries are related through their skills.

These four points make human capital development of a region is a key determining factor for smart specialisation.

Montenegro

This report (condensed summary, extended summary, or the full report) presents findings from an ongoing effort to assess the implication of skills development for the Republic of Montenegro’s smart specialisation strategy. The ETF’s role is to support Montenegro as it endeavours to give vocational education and training (VET) systems a clear role in the implementation of its smart specialisation strategy (S3). Smart specialisation is an innovative policy approach that aims to boost jobs and growth by enabling countries and regions to better exploit their competitive advantage. For Montenegro, this means taking full advantage of its existing labour assets and investing in skills. Indeed, policy that prioritises human capital development will foster growth and innovation in the two priority areas identified by smart specialisation: renewable energy sources and sustainable health tourism. From the quantitative and qualitative research carried out by the Montenegrin government authorities with the ETF’s support, it is clear that there is strong potential for growth in both renewable energy sources and sustainable health tourism. The current skills supply in Montenegro can be tailored to provide the priority areas with the skills necessary for growth. This can be accomplished through more flexible and targeted programmes in post-secondary or tertiary education as well as VET. Transferable skills also need to be developed in initial education and in continuing, life-long learning courses. Fluency in English is essential as are ICT skills. Standard qualifications for careers in the two sectors need to be updated. Finally, in order to have greater precision in terms of skills and training gaps, better data collection at the subsector level is recommended. This will improve the government’s ability to plan its education policy.  

In this report, eight policy proposals are put forward. The purpose behind these measures is to upgrade the current system by enhancing skills development, which will lead to growth and innovation in Montenegro. These policy measures are as follows:

1. Prioritise the development of more sensitive human capital-related statistics and analyses that are crucial to proper education planning by assessing the current situation, estimating needs and emerging trends.
2. Consolidate the human capital dimension of government strategies to shore up SMEs’ innovation capacity, reduce skill mismatches and increase the potential for job creation, economic growth and competitiveness.
3. Enhance awareness and follow-up of S3 priorities through increased stakeholder involvement, long-term budget support for S3 activities, engaging civil society and improving public-private partnerships. 
4. Strengthen the role of the industry and businesses in S3 follow-up. Businesses are profit-oriented and as such are exposed to market competition to the highest extent. Therefore, this group has the greatest needs and the greatest potential for human capital development. Industry and business should, thus, take the lead in human capital needs identification as well as skills development and planning.
5. Develop a strategic framework for health tourism so that Montenegro can become a health tourism destination. For this to happen, new services, new skills and new competences will be necessary.
6. Update and increase the education offer relevant for the S3 priorities by developing occupational and qualification standards for the renewable and health tourism subsectors.
7. Embed key competences, transversal skills and sustainable development concepts in the educational programmes. These should be acquired at all levels of education and beyond through lifelong learning.
8. Expand vocational training to secure a skilled workforce for S3 economic priorities by reinforcing the links between IVET and CVET providers. In general, SMEs and family-run businesses require innovative and flexible forms of education and training to meet skills needs.

Moldova

This report (condensed summary or the full report) presents findings from an ongoing effort to assess the implications of skills development of Moldova's preliminary smart specialisation priority on food processing.

Overview of the renewable energy priority area

In Moldova, renewable energy consumption has been growing; it reached 27.8% in 2017. Biomass, especially solid biomass, accounts for 98% of this consumption. Over the past decade, biomass heating units that burn straw, pellets, briquettes and firewood have been replacing coal- and gas-fired boilers as well as basic stoves. This emerging energy resource and economic area is tied to Moldova’s strong agricultural sector that produces the residue and waste to make biomass. The government recognises the potential of this industry for economic growth and job creation. The sector has also attracted interest from external funding bodies like the European Bank for Reconstruction and Development. However, despite the potential for growth and resources available, the country’s capacity to deploy renewable energy is limited.

Overview of SMEs in the energy sector

Globally, small and medium-sized enterprises (SMEs) drive the development and production of energy. Researchers predict that SMEs in the energy sector will continue to grow, especially in the renewable energy sector. Between 2015 and 2018, while the share of large enterprises in the energy sector declined from 23% to 20%, the share of micro enterprises in the energy sector increased from 63% to 70%. This demonstrates growth in the entrepreneurial mindset and flexibility in the sector, which can lead to innovation.

Institutional support for SMEs exists in Moldova. For example, the Moldova Eco Energy Competition supports start-ups with innovative energy projects. To strengthen Moldova’s capacity in the biomass area, the EU and the United Nations Development Programme established an organisation to bring together research and development, and institutional stakeholders in the energy sector to promote innovation and disseminating information about biomass.

Analysis of skills needs

The report identifies the following skill sets needed by the energy priority area:

■ Technical competences – general understanding of the field, with an emphasis on engineering skills. The specialists are expected to install, maintain, test and monitor the energy generation systems.

■ Language competences – knowledge of foreign languages, especially English, is crucial. This includes the ability to understand and communicate.

■ Digital competences – the required skills range from basic ICT literacy and the ability to manage and analyse data to the management of IT systems and operational technology.

■ Generic competences – this includes analytical and problem-solving skills, critical and innovative thinking, motivation/desire to learn, working with others and resilience.

For the renewable energy sector, the following profiles were identified as the most important if renewables are to be focused on within the smart specialisation strategy:

Tertiary education qualification:

■ wind/solar power design engineers,

■ wind/solar resource assessment specialists, and

■ biomass production managers.

Secondary/post-secondary education qualification:

■ wind/solar service mechatronics technicians, and

■ electricians, plumbers, roofers and construction workers specialising in solar, wind and bioenergy.

Workers with a vocational background are likely to find work in this field, but the number of workers with a low level of education is less than it is in the overall population, which points to a need for a skilled workforce. Staff turnover is lower than it is for all economic activities. However, skills mismatches exist as evidenced by how the number of redundancies exceeds the number of hires.

The energy sector needs more investment, more state support for innovation and technology transfer and a qualified workforce. Improved cooperation with research institutions, universities, and vocational education would also be helpful so that companies do not need to invest as much on employee training. Attracting highly skilled professionals is also a challenge for companies as their salaries are not competitive. From the existing national labour market and education data, as well as interviews with employers, it can be concluded that the energy sector suffers from both skills shortages and skills gaps.

Education in the field of electricity and energy is mainly provided by universities, colleges, centres of excellence and vocational schools. Moldova’s 89 VET providers are practical, technology-focused and provide opportunities for work-based learning. Rooted in local communities, they also have good relationships with SMEs. However, VET providers lack the drive necessary for innovation, growth and competitiveness. This limits their scope to respond to the renewables sector that needs new skill sets quickly, including entrepreneurship skills. This is also the case in higher education where little progress has been made to promote entrepreneurship. Informal and non-formal learning are not recognised and CVET for electricity and energy is rarely available. Currently, the education offer related to renewable energy is very limited and concentrated mainly at the tertiary level. When it comes to vocational secondary or post-secondary education, the offer is almost non-existent in terms of scope and number of providers. The training for adults is underdeveloped and companies are likely to provide ad hoc training themselves.