Electrician Supply Shortage Raises Stakes for HR Organizations

The electrical contracting industry stands at a critical inflection point, with numerous structural tailwinds underpinning the industry that we expect to drive demand for electricians over the medium to long-term. These demand trends coupled with a declining supply of electricians elevates the need for high caliber approaches to HR functions around skilled trade recruiting, development, and retention to maintain and grow market share in this attractive segment. This pressure to attract talent creates a dynamic whereby larger, well capitalized organizations appear to have an advantage over smaller local firms. However, with the right focus and attention on creating clarity and opportunity for skilled tradespeople, local and regional firms can position themselves for significant growth.

Macro Environment

Labor Imbalance

There are ~820k electricians in the U.S. today, with demand forecasted to increase 9% to 896k electricians by 2034. This is well above both total forecasted job growth (3%) and forecasted growth for broader construction trade workers (6%) over the same period. This rising demand is coupled with a declining labor supply, due to an aging workforce (~30% of union electricians are nearing retirement age) and a shortage of new labor entering the workforce. The National Electrical Contractors Association (“NECA”) estimates that every year 7k new electricians enter the industry while 10k retire. By 2034, this implies a ~110k electrician labor shortage. This shortage is already reflected in the current market through higher electrician wages (increasing at ~3–4% annually) which are likely to persist given the supply / demand imbalance.

Demand Drivers

The U.S. electrical load is forecasted to grow 2.5% per year over the next 10 years, a significant step up from the 0.5% annual growth achieved over the prior 10 years (as outlined below and on the following page). Incremental growth above the 0.5% per year baseline is expected to be driven by (i) building electrification (1.0% per annum), (ii) data centers (0.5%), (iii) industrial growth (0.3%), and (iv) EV adoption (0.2%).

I. Building Electrification: Energy demand is shifting from on-site fossil fuels (e.g., gas-fired heating, water heaters, etc.) to electric alternatives (e.g., electric heating, heat pumps). This has been an ongoing trend (e.g., in 2010 35% of U.S. households’ main source of heating was electricity, up to 42% in 2024) and is expected to accelerate, with certain cities across CA, CO, and MA already banning the use of fossil fuels for newly constructed buildings.
II. Data Centers: These facilities are significant users of electricity, and material investments are being made in data center electrical infrastructure to supply the compute power required from AI adoption. While the data center buildout will have an impact on electrical demand, as a percentage of the market it is relatively nascent today. Headlines overstate data centers’ impact on demand, and strong tailwinds exist outside of this category – making the market less susceptible to a bubble popping.
III. Industrial Growth: Aided by reshoring and federal policy support, new U.S.-based industrial plants are being constructed, leading to boosted demand for electrical power as these plants are connected to the grid. Additionally, further demand is driven by facilities that are out of date that require retrofitting / reconstruction.
IV. EV Adoption: Significant grid investment will be needed to support the anticipated demand for EVs and the inherent need for additional charging stations to keep them powered. As the number of EVs on the road continues to increase, there will be further pressure to expand current charging infrastructure both in the form of at-home charging ports and public charging centers.

For informational purposes only. Intended for General Partners or Management teams considering partnering with The Riverside Company. Not to be considered an offer or solicitation of securities or investment services.

Implications/Riverside's View

Amid this backdrop, winning companies will:

Treat recruiting as a sales process and manage the funnel accordingly.
Clearly articulate the opportunity for new employees including: (i) clear job descriptions that go well beyond cliched qualifications and describe what a successful employee does daily; (ii) articulating the compensation opportunity over the first several years along with clear criteria for increases; and (iii) communicating what the organization will do to enhance employee skills.
Develop robust training programs to assist with skill development. Larger organizations may do this internally while smaller organizations may outsource to achieve similar impact.
Tie compensation to performance that is mutually beneficial.
Hold managers accountable and compensate them for improving the skills of the workforce.
Monitor market pricing and insure you are the best place to work. Increase prices to support wages that make you the employer of choice.
Share upside from equity value creation through metrics-based cash compensation or broadly distributed equity or sale bonuses.
Partner with high quality unions in markets where it is beneficial.
Offer a multi-capability platform (e.g., testing, maintenance, and construction) across various end markets to reduce reliance on any single activity or cycle and effectively utilize labor across various macro environments.
Leverage best-in-class technology and standardized processes to increase electrician productivity.
Build regional density and scale to improve electrician utilization and reduce required travel.

Riverside has experience building skilled trade businesses and believes there is an opportunity to apply
this experience in the electrical contracting market. Riverside is eager to connect with business owners in the category to share our learnings and work collaboratively to create a best-in-class operator and take advantage of the compelling opportunity. If you are willing to discuss further, please contact John McKernan at 212-484-2688 or jmckernan@riversidecompany.com.

Riverside At A Glance

The Riverside Company is a global private equity firm focused on partnering with small companies and family-owned businesses. We harness the resources of a large firm with a unique operating model, refined through over 1,000 investments, to help small companies and family-owned businesses scale and grow.

For over 30 years, Riverside has honed its approach to sourcing best-in-class companies. The firm’s financial and operational experts conduct a fair and efficient process that helps ensure successful outcomes.

The firm’s teams of financial and operational experts deliver a fair, fast process that helps ensure successful outcomes:

Dedicated to Growth: Riverside fosters long-term growth through fundamental operating improvements and add-on acquisitions.
A Committed Partner: Riverside is dedicated to working with existing employees and managers to identify and expedite growth initiatives by making investments in people, systems, technology, facilities, equipment, and product development.
Global Footprint: Riverside transcends borders and barriers, giving companies direct access to a global marketplace.
Flexibility: Riverside can structure transactions in a way that works best for business owners.
Established and Efficient Closing Process: Riverside moves quickly for compelling opportunities, sometimes closing deals in as little as 30 days. The firm has never failed to close a deal for lack of funding.