The steampunk technology that could save America’s cities

I’ve come to 345 California Center, a postmodern hexagon that towers over San Francisco’s financial district, to get a look at the hottest new idea for how to break the urban doom loop — the post-pandemic, remote-work apocalypse that is hollowing out America’s cities. And when I say “hottest,” I don’t mean it metaphorically. It’s like a sauna down here. Because the Utility Meter Room doesn’t run on a self-contained, industrial-sized boiler, like most big buildings. Instead, it’s drawing a feed of blistering, high-pressure, vaporized water from a century-old loop of steam pipes that runs beneath the city’s streets. The steam loops are a relic of the 19th century, as forgotten as the pneumatic tubes that used to shoot mail all over American cities. But unlike the pneumatic tubes, the steam loops are still there — and they can provide enough heat to keep a building like 345 California Center nice and toasty, even on the coldest of days.

The steam loops are part of an antiquated system known as “district energy.” It was basically a shared-services model: a utility would make steam at a central location and then pipe it out to every building in the city. Nobody had to provide their own heat — it was way more convenient, and cheaper, to get it from a common source. 

But then cities began to abandon district energy. Buildings, businesses, and homes started making their own hot water in boilers fueled by coal, then oil, then natural gas. Sometimes it was cheaper, and maybe it was more convenient. But it also set the planet on fire. More heating meant more greenhouse gases, and more global warming. 

Which brings me back to our steampunk future. Today, cities are starting to price the looming climate catastrophe into their energy costs. Starting this year, commercial buildings in New York City will be slapped with steep fines if they’re emitting too much carbon. Boston and Washington have similar “decarbonization” laws in place, and San Francisco isn’t allowing natural gas in any new construction. That means businesses need to find a cleaner, cheaper source of heat. And those ancient steam loops beneath the streets are starting to seem like a ready-made solution.

“The real benefit of a district-energy system, especially in cities, is the distribution system,” says Kevin Hagerty, the CEO of Vicinity Energy. “If a city wants to decarbonize, and they have a district-energy system, it’s much easier. They don’t have to change things on a building-by-building basis.”

In July, Vicinity is installing what will be the nation’s first zero-carbon urban steam loop. Drawing electricity from the increasingly decarbonized New England grid, powered by solar and offshore wind, the utility will use the energy to boil water and then deliver steam directly to Boston office buildings and restaurants and storefronts through the city’s antiquated maze of pipes. It’s a remnant of the Industrial Revolution being used to forestall a lethal climate evolution.

District energy could also be a godsend to businesses struggling to survive the current landscape of empty offices and boarded-up shops. By taking steam right out of the street beneath them, commercial landlords can pay less for their utilities and avoid carbon fines — which means they can lower their rents and hold on to tenants who might otherwise bail. District-energy loops also eliminate the need for boilers and other cumbersome building infrastructure, freeing up space for tenant-grabbing amenities like gyms, roof-decks, and golf simulators. (Yep. That’s a real thing.)

The other choice? Spend thousands to upgrade a building’s energy systems — cash that landlords don’t have on hand, and an expense they can’t pass along to tenants. “If you’re a building owner, district energy allows you to pay a small premium on your service to get that type of steam,” says Blake Ellis, a principal at the engineering firm Burns & McDonnell. “Then you don’t have that big capital outlay you probably don’t want right now.” Especially if, as in many downtowns, your building is only 70% occupied.

About a third of the cost of running a commercial building is energy. And according to one major study, a building as energy-efficient as 345 California Center can charge 20% more for rent than a comparable, inefficient building. Every dollar saved in energy costs, the study found, equates to 3.5% higher rent. And it’s a lot easier to be energy efficient if all you have to do is plug into a carbon-free steam loop. 

“This building is 40 years old,” Tim Danz, the chief engineer for 345 Cal, tells me. “But we’re using the latest technology to manage our energy.” He points to the gnarl of pipes that shoots the steam up to the 36th floor, where it’s used to cook a water supply large enough to heat the entire building. Having a boiler, Danz explains, “would be another system we would have to provide care and feeding for.” District energy, by contrast, is just there for the taking, right beneath our feet.

The most convincing evidence that steam loops make economic sense comes from who’s getting into the district-energy game. Vicinity, the nation’s biggest clean-steam provider, is owned by Antin Infrastructure Partners, a leading private-equity firm. Cordia, an energy provider operating in 10 cities, is partially owned by the private-equity giant KKR. Everyone needs heat — which makes it a highly bankable investment. “These private-equity funds come in and find areas where they can put capital into a business and get a nice steady rate of return,” Hagerty says. “Decarbonizing takes capital, and private equity is a great source of capital.” 

From AI startups to biotech companies, steampunk-heated buildings could become the cool new place to be. 

In the long run, of course, private equity may decide to do what it always does and load up these new energy businesses with massive amounts of debt before dismantling them for parts. But for now, the big money sees big profits to be made from America’s forgotten infrastructure. Outside of places like airports and college campuses, the idea of district energy fell out of favor long ago. We let the systems go fallow — but fortunately, all the accumulated infrastructure we buried on top of the old steam loops made it impossible to dig their little-used pipes out of the ground. So the whole thing was still down there, waiting, when COVID drove millions of city dwellers to head for the countryside. Now, by drawing heat from their old steam loops, America’s cities have an opportunity to jump-start all the downtown commerce that was crippled by the pandemic. 

And it could happen all over the place! Dozens and dozens of cities have steam loops they can use, from New York and Chicago to Miami to San Diego and Portland and Milwaukee. What’s more, lots of companies these days are looking for greener buildings, both to save money and to burnish their environmental bona fides. From AI startups to biotech companies, steampunk-heated buildings could become the cool new place to be. 

“Forward-minded companies want to be in a building that doesn’t have any on-site fossil-fuel combustion,” says Costa Samaras, the director of the Scott Institute for Energy and Innovation at Carnegie Mellon. “The best, greenest buildings will be net-zero buildings. They’ll be considered a premium asset. The challenge is, are we going to get enough premium assets in time?” Meaning: Can we use steam loops to fix the urban doom loop before the climate doom loop dooms us all?

Adam Rogers is a senior correspondent at Business Insider.