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The Geography of Energy Production: A Changing Landscape

By Adam Blair
May 17, 2012

It is widely accepted that increased renewable energy generation will result in lower greenhouse gas emissions to the extent that dirtier fossil fuel technologies are replaced by sources like wind and solar. What I would argue is much less familiar to most people, however, is how the geography of energy production will change in countries making a transition to more renewables.  The reason for this shift can be explained in large part by physics: sources of renewable energy (e.g., sunlight or biomass) are, generally speaking, lower in energy density than most conventional, petroleum-based sources. Energy density is a term used to describe the amount of energy stored per unit of volume. In other words, the higher the density of an energy source, the more of it can be stored or transported in the same amount of space.

This concept, while overly technical for some, becomes extremely important when planning for new energy development at the local and regional level. Similar to the industrial, smokestack development most of us are familiar with, the generation of energy and its associated supply chains have the potential to affect land use patterns in significant ways. In a report my colleagues and I authored for the Rural Policy Research Institute, we explored this phenomenon at length, discussing in particular the potential implications a transition to renewable energy will have for rural America.

What has become clear to us, as well as scholars like Vaclav Smil at the University of Manitoba, is that rural regions in particular will play an increasingly important role in the production of energy as generation requires more and more space. While this prospect holds great promise for developing countries as well as many of the struggling economies in the American South and Midwest, continued urbanization around the world will lead to a somewhat complicated economic geography of the renewable energy industry. Illustrated in places like Texas, the demand for electricity (and other forms of energy) is and will become increasingly concentrated in metropolitan areas while generation occurs miles away in the countryside.

The expansive geographic separation between the supply of energy and the demand for it creates added inefficiencies for the industry, which, of course, results in increased costs. In addition to the added expense of transmitting electricity miles from (wind or solar) farm to market, having little proximity to skilled labor pools and agglomeration economies is also costly for firms over the long run. While the industry is adapting by co-locating manufacturing facilities and establishing local workforce training programs in some areas, its urban consumer base is, of course, fixed.

Renewable energy developers may be able to continue with business-as-usual as long as their operations are subsidized by state and federal governments, but the industry might look to a growing trend of localization in the agriculture sector for ways to ensure their sustenance. Similar to the way production and consumption of food has become more local in many parts of the U.S. with the growth of urban gardens and community supported agriculture, distributed (or decentralized) energy production may hold great promise for the world’s urbanizing populations.

In contrast to the large, centralized energy-generating facilities that are commonplace in most countries (think nuclear, hydroelectric, and coal-fired electricity plants), distributed generation is small-scale and often occurs at or very close to the place of consumption. While economies of scale are sacrificed with smaller generating facilities, these losses can sometimes be recovered by the savings of not having to transmit/transport energy as far. Other potential benefits of distributed energy include greater energy security (e.g., less susceptibility to widespread blackouts) and lower maintenance and replacement costs. How policy and market forces will shift in the U.S. and abroad is unclear as ever, but with a transition to renewable energy, the changing landscape of energy production is something we can be quite sure of.