MIT Center for Real Estate

Our graduates build the future

section imagesection imagesection imagesection imagesection image

The Energy to Build the Future

MIT Center for Real Estate Conference Explores the Implications of Increasingly Expensive Energy Consumption For the Real Estate of Tomorrow

April 2006

“Between now and 2050 real estate will remake the physical world,” MIT Center for Real Estate (MIT/CRE) Director David Geltner told a large group of CRE's Industry Partners, faculty, students and guests who attended the Center’s annual Partners Meeting on April 6. The daylong event focused on the future of increasingly expensive energy and its implications for the real estate industry. It was held at 70 Pacific Street, a dormitory on MIT’s West Campus chosen specifically because it exemplifies modern, energy efficient construction.

“With the world’s urban population projected to double between now and the middle of the 21st century, we’ll build as much real estate, in the world’s cities, as currently exists,” Geltner said. “Over the next 45 years we’ll virtually recreate all existing real estate.”

The energy implications, Geltner said, are immense. “When you examine total U.S. energy consumption by sector, from 1960 to 2004, you find that real estate is the largest energy consumer,” he said. “It’s greater than transportation or industry. There is, however, a relationship between transportation and real estate. The way real estate is developed and located affects transportation use.”

What is especially troubling about such unprecedented growth, Geltner told his audience, is that the Earth reached its capacity to effectively absorb and recycle carbon dioxide emissions in the middle of the last century. Yet energy consumption has risen relentlessly ever since and continues to rise with no end in sight.

“Since energy consumption is closely related to CO2 emissions, how to address the world’s growing real estate needs while conserving energy is a crucially important problem,” he said. That problem occupied the Center for Real Estate throughout the day of activities, which included presentations by a number of energy experts and tours of MIT’s Sloan Automotive Laboratory, Plasma Fusion Center and Nuclear Reactor.

Coal, Hydrogen and the Globe

Jón Björn Skúlason, general manager of Icelandic New Energy Ltd. (INE), explained how the petroleum crisis of the 1970s gave birth to the world’s foremost hydrogen energy model. It was University of Iceland Professor Bragi Arnason who predicted, at the time of the oil crisis, that hydrogen would become the fuel of the future and that Iceland – blessed with a wealth of geothermal power and water – was ideally equipped to generate a virtually limitless hydrogen-based energy system.

However, Skúlason noted, it would be 1998 before the government of Iceland actively committed to policies that would propel creation of the world’s first hydrogen economy, establishing a favorable framework for business research; investing in education and training; attracting international cooperation; and adopting tax incentives, including exemptions for hydrogen vehicles. Determined to move forward with hydrogen, Iceland created VistOrka, a holding company that united the program’s primary corporate supporters: DaimlerChrysler, which would design and build hydrogen-powered buses for public transport; Norsk Hydro, a Norwegian company committed to the development and positioning of hydrogen as a fuel for future energy; and Shell Hydrogen, a division of Shell that has been developing hydrogen and fuel cell businesses since 1998.

The primary focus of INE is those key parts of Iceland’s energy system – transportation and marine applications – that are not powered by the nation’s vast renewable energy system. Skúlason’s presentation focused primarily on the Ecological City Transport System (ECTOS), Icelandic New Energy’s successful hydrogen fuel demonstration project. Since ECTOS was launched in 2001, INE has overseen the launch of Iceland’s first hydrogen production, storage and filling station in Reykjavik, and hydrogen-fueled buses have driven tens of thousands of kilometers without incident.

“Most people seem to think hydrogen is so complicated it can’t work,” he said. But in Iceland consumers are very enthusiastic, thanks to the fact that Icelandic New Energy mounted the kind of carefully orchestrated public information campaign that he believes would be required in most countries before hydrogen could be successfully introduced, most people are very enthusiastic.

Building upon the success of ECTOS, INE is forging ahead with efforts to expand the use hydrogen as the primary fuel for passenger cars and the country’s fishing fleet. Iceland, said Skúlason, is becoming “a living laboratory” for development of hydrogen fuel. INE is so encouraged by the success of ECTOS, he said, that it is now targeting a complete Icelandic conversion from fossil fuels to hydrogen by mid-century, a goal he describes as ambitious, but achievable.

To learn more about Icelandic New Energy and the ECTOS project visit the INE website at http://www.newenergy.is/newenergy/en/.

MIT graduate students Salem Esber and Mark Bohm offered a guardedly optimistic view of the future of “Coal Energy and Implications for Real Estate.” Coal, they noted, currently delivers just over 23 percent of the United States’ primary energy supply, a portion likely to increase as natural gas sources dwindle while at least two centuries’ of supply remains in the world’s robust coal reserves.

Used principally for electric power generation, coal offers some significant benefits, Esber and Bohm noted. It remains inexpensive and widely available. There are proven technologies for its use. And it is mostly used where it is sourced, reducing shipping expense. However, the fuel as significant pollution disadvantages, principally related tom carbon dioxide emissions, and there are also safety and environmental concerns related to mining, especially in some foreign countries where the industry is not regulated as rigorously as in the United States.

Esber and Bohm predicted that coal will have an ongoing important role in providing stable and reliable electric power for real estate provided the pollution issues can be effectively addressed. Two kinds of technologies – integrated gasification/ combined cycle and carbon capture/sequestration – offer hope for addressing the problem.

Gasification involves the conversion of coal into gases, including hydrogen, which can be burned more cleanly. Sequestration aims to reduce carbon dioxide emissions by isolating and storing the carbon. One approach involves capturing the gas where it is generated in power plants and industrial processes and then storing it underground in depleted oil and gas reservoirs, coal seams and the deep ocean. Another line of research looks at the use of natural processes, such as forestation, to remove carbon from the atmosphere. Both of these nascent technologies have been the subject of intensive research at MIT for nearly 20 years.

Prof. Henry D. Jacoby, co-director of the MIT Joint Program on the Science and Policy of Global Change, offered a wide-ranging and often provocative look at the future of energy demand as the world’s population grows at an unprecedented rate over the next century. Jacoby’s presentation relied heavily upon the MIT Integrated Global System Model, a complex computer representation of Earth’s natural systems for cycling carbons. The model allows scientists to test various future energy consumption scenarios and project how they might impact the planet’s ecosystem. It was developed as part of a long-term MIT study of how humans might reduce climate change over the next 100 years.