Vertical farms are notoriously power-hungry and require large amounts of energy to operate representing the bulk of their operational expenditure (OPEX). Even before rising energy prices, many vertical farms have already found it challenging to achieve profitability due to the high costs of operation; with dramatic increases in the cost of energy, this could be the final nail in the coffin for many vertical farms. The IDTechEx report “Vertical Farming 2022-2032” explores the economic and technological factors shaping this rapidly growing industry.
According to the IDTechEx report, over the short-term vertical farms will need to decouple themselves from the price of gas by relying on renewable energy sources (Solar panels, local biomass boilers, and other sources). The report later mentions that though renewable energy may inflate capital expenditure, it may decrease operational expenditure in the long run.
Reducing energy usage is also an important task outlined by the report for vertical farms. One of the main areas of energy usage is LED which has significantly improved over the years but is getting closer to the theoretical improvement limits.
“The architecture of current LED semiconductor chips is close to theoretical limits. That is not to say that energy usage cannot be lowered; an alternative approach, as used by Intelligent Growth Systems and Perfand LED, is to periodically modulate energy delivery to lights – as opposed to a constant energy supply. This potentially reduces the average energy consumption without affecting, or possibly even enhancing, crop growth.” mentions the report.
Another approach outlined by IDTechEx aligns with a solution provided by CoBank’s recent report on vertical farming which focuses on growing crops that can hardly be grown on-field or do not yield the same output, flavors and qualities than what could be find “traditionally”.
“Vertical farms could instead target a completely different market; a major advantage of vertical farming is that it can grow crops that may not be possible through conventional agriculture, especially in cold Western climates. By growing produce inaccessible to traditional agriculture with a focus on flavor, vertical farming could command a further price premium for its products. A particularly noteworthy example would be seen in Oishii: the Omakase strawberries grown by the company are noticeably sweeter than many conventionally farmed counterparts, and these are used as one of the selling points to justify the comparatively higher pricing point. Vertical farms also have opportunities to produce medicinal plants and herbs, along with other similar high-value crops. Such strategies may play well to the strengths of vertical farms and increase the attractiveness of their produce.” mentions the report.
Final Concluding Remarks by the report:
Rising energy prices may have accelerated the entry of the vertical farming industry into the “valley of death”, wherein falling expectations are caused due to a need for significant increases in investment. However, these may also catalyze the development of sustainable business models within the industry to increase profitability.
The high energy costs may persist for some time, and this period will undoubtedly prove intensely challenging for vertical farms. Nonetheless, this also presents a crucial driver for vertical farms to improve their efficiency. Indeed, the next few years may provide a crucible to forge the vertical farming industry into one that can finally provide major competition towards conventional agriculture.
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