While many countries and the United States face similar challenges with developing domestic capacity, American businesses could look into monitoring developments in manufacturing and continue to build more resilient supply chains through diversification. 3. Reduce demand and employ alternative technologies. Additional cutting of end demand for manufactured materials could further reduce the need for manufacturing capacity. Alternative technologies up and down the value chain could be explored as potential substitutes when supply chains become truly constrained. (See “Action area 6: Accelerating
transferable skills that would be needed in rapidly growing areas of the energy transition. McKinsey analysis estimates that nearly 10 percent of total energy transition labor needs in 2030 under the Achieved Commitments scenario could be met with the workforce currently employed at assets that are likely to retire. 2. Develop deeper labor pools. There will be significant need to develop new labor to achieve the energy transition. For example, only 3 percent of the electricians needed for the Achieved Commitments scenario could be hired from assets that are likely retiring without training or reskilling. To develop new talent, hiring practices might have to be adapted, such as by shifting to skills-based rather than credential-based hiring. On-the-job training and collaboration with vocational schools, universities, and nongovernmental organizations (NGOs) would be critical to create training programs. This training and development not only is needed for the energy transition but also would facilitate the creation of good jobs. 3. Increase efficiency. Players could ensure efficiency at all levels of their organization by adopting lean practices and digital and automation tools that can reduce overall labor demand. For example, in our experience, contractor productivity can be improved by approximately 40 percent on average through lean practices. 4. Create incentives and pathways to good jobs. Government could consider opportunities to support the creation of good, viable positions through incentives for jobs above a wage threshold. For example, the IRA provides credits for “businesses that pay prevailing wages and hire registered apprentices, ensuring local wages are not undercut by low-road contractors.” 18 Additionally, governments could develop partnerships with community colleges, vocational schools, and companies
technological innovation to ensure timely deployment of new clean technologies.”)
4. Plan for and manage constraints. Private- sector players could leverage AI to increase the resilience of the supply chain by incorporating uncertainty into realistic simulations to evaluate scenarios, identify risks, and develop optimal plans for different time horizons. 16 They could also use AI to evaluate contracting mechanisms and the benefits of built-in supply chain flexibility. 17 5. Provide incentives for domestic manufacturing. Government could consider tax and financial incentives to develop and support domestic manufacturing. These enticements include the Advanced Manufacturing Production Credits for clean technologies contained in the IRA. For example, solar panels can receive more than 18 cents per watt of tax credits for domestic manufacturing of polysilicon, wafers, cells, modules, and polymeric backsheet. Solar trackers, solar inverters, wind components, and batteries are also eligible for manufacturing production tax credits. And some rebates, such as those for electric vehicles, are contingent on domestic assembly or component manufacturing. Develop and acquire talent 1. Hire workers from retiring assets. People working in retiring assets such as coal have many
16 “Building value-chain resilience with AI,” McKinsey, November 26, 2021. 17 “Supply chains: To build resilience, manage proactively,” McKinsey, May 23, 2022. 18 “Fact sheet: The Inflation Reduction Act supports workers and families,” White House, 2022.
Accelerating the journey to net zero
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