BPIE’s Climate Conversations series shares a diverse range of perspectives on buildings and climate policies from a wide variety of experts. We seek to explore solutions and illuminate blind spots related to reducing the climate impact of buildings, and delivering a just transition that leaves no one behind.

Upskilling and growing the workforce in renovation and construction is fundamental to scaling up renovation rates that will help the EU achieve its climate goals. At the same time, skills and education are foundational to strengthening the social fabric and ensuring a fair and just transition. You can’t do one without the other; these elements are inherently interconnected, each dependent on the other for success.

GCP Europe is a network of 14 national mechanical contractors’ associations across 12 EU countries – representing a broad range of buildings experts from contractors, plumbers, HVAC installers and building services engineers.

In this discussion with Oliver Jung, GCP Europe’s Secretary General, we explore how the skills shortage is affecting the construction industry. We discuss the challenges mechanical contractors are facing in meeting the demand for renovation projects. Moreover, we reflect on the gap between the capacity of the mechanical contracting industry and the renovation ambitions of EU and national governments. Finally, we examine potential solutions such as incentives/bonuses for renovation contractors, upskilling, and the role of educational rebranding in making trades a more attractive career option.

Mechanical contractors and the Renovation Wave

BPIE: What’s the role of mechanical contractors within the building sector?

Oliver: Mechanical contracting is mainly concerned with heating, pipes, and ventilation systems. The type of work that mechanical contractors do is diverse, and our associations’ membership varies from country to country.  But GCP Europe’s members all have a common purpose in providing thermal and domestic hot water services in buildings.

BPIE: What is the role and potential influence of mechanical contractors in driving the Renovation Wave? And how important are they within the construction/renovation ecosystem?

Oliver: There is always a strong need and demand for thermal comfort. People want their homes and offices to have a certain temperature. The question of temperature and comfort is a constant in the construction/renovation ecosystem. There are certainly some local differences in the demand for mechanical contracting services, but, in general, in Europe there is always work available in this sector. There is more work to be done than there are people to do it.

The climate and environment concerns in Europe also means end users may want to – or be required by law – to change their heating systems, and this has increased the skills shortage in our sector even further. Now people who wouldn’t have considered renovating their homes are doing it, whatever the motivation.  And then we have another layer: ending dependence on Russian gas. And we want to do all this quickly. So all of these factors have widened the gap between demand and the industry’s current capacity.

BPIE: The European Year of Skills comes to an end in May 2024 – what do you think has been this initiative’s biggest value?

Oliver: It has been helpful because it’s bringing visibility to the skills’ shortage issue. But I’m not sure that the reality of the skills shortage has become obvious to everyone yet. Our industry is working within a policy framework which has increased the gap between aspiration and reality.

The normal way the market operates is incompatible with the speed that the EU and national governments want to achieve change. The importance of a skilled workforce can’t be overstated.

The normal way the market operates is incompatible with the speed that the EU and national governments want to achieve change. The importance of a skilled workforce can’t be overstated. The skills issue should be highlighted by candidates in the European elections, and it should be a priority in the next Commission’s manifesto. And not just because it looks good, but because it is fundamental to staying consistent with our political goals.

Achieving the Renovation Wave’s objectives?

BPIE: So, you believe we need nothing short of a paradigm shift in terms of skills to achieve the Renovation Wave’s objectives?

Oliver: There is one school of thought that would say we should make objectives that are achievable and realistic, otherwise we’re just fooling ourselves. But another school of thought, the one I personally prefer, the more transformative one, is where the objective is far-reaching, and we know we can’t achieve it today – we don’t even fully know how we’re ever going to achieve it. But we set the objective, and by doing this we’re giving ourselves the possibility to achieve something we otherwise wouldn’t have imagined possible. And then we require ourselves to become the society that can achieve the objective. And it can start with discussions like the one we’re having right now. So the fundamental question is: how do we need to change our societies, our economies, our policies to reach these goals?

BPIE: Coming back to skills: there’s this big gap, and a need to focus all our attention on creating capacity and doing many things differently. What is the sentiment on the ground among mechanical contractors?

We don’t have the luxury of time. We can’t just sit back and let market forces operate and lead the transition.

Oliver: The sentiment varies from country to country. It varies from installer to installer. There are those who say, everything is working fine as it is, we don’t want change. The worst-case scenario would be for these people to quit the industry rather than change. This would just increase the skills shortage and capacity gap even more. We just can’t replace people that fast – maybe over time we can, but not overnight. But we don’t have the luxury of time. We can’t just sit back and let market forces operate and lead the transition.

Investing in the transition

BPIE: What are the key issues that your more conservative members are worried about?

Oliver: Their main concern is that new requirements from the European or national levels will make their work more complicated or costly. For example, some are concerned that mandatory upskilling and retraining would require additional time on top of their daily business. They are also concerned about additional bureaucratic work that they aren’t equipped to handle.

BPIE: And what about those who are more progressive?

Oliver: They have already started investing in this transition. They see this as a competitive advantage. But again, not everyone is very interested in competitive advantage because there’s not a lot of competition. There is generally always more demand for works than supply in this sector. So that’s why policymakers are waking up and looking at the topic of skills as important. But declarations aren’t enough.

BPIE: What long-term impact do you expect from the European Year of Skills?

Oliver: You must be realistic because it’s only one year. At the same time, we transformed a whole society in one year during the recent pandemic. So huge transformation is possible. But we’re not at that level yet.

BPIE: Are you saying we need to treat upskilling and preparing the workforce with the same urgency with which we managed public health during the pandemic?

Oliver: I don’t think a direct comparison between the two is appropriate, but it is an interesting analogy. The COVID-19 response proved that if something is urgent enough, it is certainly possible to come up with a solution. Will the solution be perfect? Likely not.

But that’s not the point. The point is that when we decide something is an absolute priority, we can adapt quickly. And I strongly believe that once the market is set correctly, things will go in the right direction and that then it will be just a matter of mapping, monitoring, and the exchange of best practices and fine-tuning.

Effective implementation

BPIE: So how do we set up this market correctly? My specific question is what’s your take on how minimum energy performance standards (MEPS) can help solve the skills’ shortage? The logic is that mandatory requirements will give security to investors, to real estate companies, to banks, to homeowners, to everyone, on what is expected from them. This in turn can create more demand for renovation services, for new financial products, etc. Then we can tell universities and schools that we need to get more people in jobs like this. MEPS could make companies decide that they need to train more people. But can we assume that one mechanism can fix the market?

Oliver: You’re giving a perfect illustration. MEPS are a standard requirement that you put in place. But the real question is are you willing then to match it with implementation?

BPIE: So what is key in terms of effective implementation?

Oliver: Effective implementation in large part requires efficient use of public and private funding. Inefficient use of money can distort the market. Currently there’s a suboptimal way of using public funds because the public funds go to the end user.

It’s often not working well because a model that’s focused on the end user assumes that the end user is really motivated. Ultimately, relying on individuals’ motivation levels isn’t the best solution. Based on existing tools, a way to solve this and change the market dynamics would be to create a financial incentive for the installer. Something like a bonus. Bonuses could be correlated to the degree of energy performance improvement an installer achieves, like the change in EPC class. They would reward an installer for being effective and investing in the transition.

Effective implementation in large part requires efficient use of public and private funding. Inefficient use of money can distort the market.

BPIE: So imagine we create these bonuses for installers, they work amazingly well and there is an explosion of renovations in a short amount of time. Everyone goes up several EPC classes and it is a big success for the Renovation Wave. Is that it? The market is then ‘fixed’?

Oliver: Effective change is not only about moving from A to B. It’s also about what happens once we get to B. You have to consider the maintenance required after the renovations are carried out. So if you install a heat pump on your system, you don’t want to have any problems with it in the next 10 or 15 years.  What if, for example, the manufacturer didn’t consider what the water quality is like where you’re located? In Brussels we have very hard water. This can ruin some components of your heat pump just days after the warranty expires. And then you have to pay €250 for repairs. This creates reputational damage, and this reputational damage means, of course, that people then don’t want to invest in certain transition technologies.

So how could we avoid this, the disappointment and mistrust that occur when technologies fail to live up to perceived standards? One approach would be to shift responsibility for maintenance to the installer as well, by providing him with a carrot that is good enough. Since we are in a dynamic where the demand is greater than the supply, it really should be a carrot, not a stick. If there was already a lot of competition, then fine, let’s put sticks out and let the best survive. But in a framework where there is a lack of supply already, we need incentives to grow the workforce.

Any bonus or incentive must be sufficiently high so that installers see economic sense in it. For example, the incentive has to be attractive enough that the business owners of such companies are willing to re-train their employees or themselves. There needs to be a business case for this. We’re talking about companies investing time and money in new ways of doing things. So bonuses and incentives need to be considered if we want to grow and create confidence in the renovation market.

BPIE: So the carrot can help creates the appetite and trust, in turn creating healthy markets?

Oliver: Yes exactly. Carrots are healthy!

Companies have to invest time and money in new ways of doing things. So bonuses and incentives need to be considered if we want to grow and create confidence in the renovation market.

Upskilling to new technologies

BPIE: Switching to skills, what are the skills that are most needed now? Or is it only a question of capacity?

Oliver: Much upskilling will depend on the technologies chosen to drive the energy transition. We now have a certain level of ambition and targets, and there are some choices to be made concerning certain technologies and solutions. The need for skills will depend on the technologies that are most suitable.

We have seen a big push for heat pumps, for example. That means we need more technicians who know how to install and maintain a heat pump, which means people coming from the heating sector. They will now have to get skills on the refrigerant aspects, on electrical aspects.

BPIE: So do you see upskilling as purely based on learning some new technologies?

Oliver: A second level of skills relates to looking at an individual building and being able to identify the best renovation solution for it. For example, maybe a specific house needs a heat pump and a pellet furnace, because that’s the best possible combination there. Having the know-how to identify the unique performance and comfort requirements of a specific building is a vital skill.

BPIE: So we need training to increase technical expertise on specific technologies, and also recruit greater numbers of competent renovation ‘generalists’?

Oliver: Yes. We need skills on the pure renovation side, and also on implementation. This includes financing. For example, we need people from the finance world that would be able to smartly correct the market by developing and testing certain financing schemes, and then adapting them to the reality.

BPIE: So, to develop this market, we need incentives and training. We also need to make these jobs attractive for young people. How do we give some of these jobs such as plumbing a rebrand and make people want to pursue them as a career?

Oliver: Changing culture is what takes the most time. But when I look at the current imperative set by policymakers, which is speed, I think the focus must be on money, incentives, practical solutions. Money is more compatible with speed rather than culture change.

The culture change required to make jobs such as plumbing attractive would require a narrative shift that begins in primary school because we will need a whole generation in order to get there.  A good narrative to inspire young people is that these are jobs which will allow you to earn a lot of money while helping to combat climate change. ‘The more money you earn, the more you’ll help save the planet.’ That’s a great incentive.

A good narrative to inspire young people is that these are jobs which will allow you to earn a lot of money while helping to combat climate change. ‘The more money you earn, the more you’ll help save the planet.’

BPIE: Any final words to wrap up our discussion?

Oliver: I think a key question is: what is the most efficient way to lead us to the vision of a climate neutral building stock? And this will by necessity be tied to economic outcomes. I don’t want to be seen as being obsessed with money, it’s just that money allows all stakeholders to create budgets and roadmaps. These will inform the consistent level of action that needs to be taken. Otherwise the vision is just empty words. There needs to be action behind it, as money drives action.