Vertical Farming's ROI Problem: Are You Missing Out on More Lucrative CEA Investments

In the concrete jungles of our ever-expanding cities, a tantalizing idea has taken root: vertical farming. Imagine towering skyscrapers, once home to bustling offices or vacant apartments, now transformed into lush, verdant farms, feeding the urban masses with fresh, locally-grown produce. This futuristic vision promises to revolutionize our food systems, reduce our environmental footprint, and revitalize our cities. But is it too good to be true?

The concept of vertical farming has captured the imagination of many as a potential solution to urban food insecurity. However, it is important to carefully consider its practical challenges and examine the innovations that have solved these problems.

The Origins of Vertical Farming

In 1800, the world population was approximately 1 billion, inhabiting a planet where roughly 30% of the land was considered arable. By 1900, the population had surged to around 1.6 billion, while the percentage of arable land remained relatively constant. Today, the global population has skyrocketed to over 8 billion, placing a strain on the world's finite arable resources, which now constitute less than 11% of the Earth's total land area, and are declining.?

All the well-known reasons such as urbanization, the climate change effects of soil erosion and desertification, and farming techniques that result in depleted soil have brought us to a point where we are looking at a time when there won’t be enough fertile land to grow enough food to feed the ever-growing population.

Controlled environment agriculture (CEA) seems to be an obvious solution since it attempts to create a perfect growing environment indoors, regardless of outdoor perils such as drought, excessive rain, depleted soil, and excessive heat. Until recently, simple greenhouses provided a degree of controlled environment protection.

A New Idea

In 2009, a book called Vertical Farming: A Year of Growing Vegetables in a Skyscraper attracted the interest and imagination of people worried about world food sustainability.? It was written by Dixon Despommier, a Columbia University microbiologist renowned for his work in public health and medical ecology. He was also personally aware of the abandoned buildings and food deserts found in decayed areas of big cities because Columbia is located just West of such an area of New York City.

Despommier devised a typical urban planning solution: put grow lights and racks designed to hold growing plants in abandoned buildings. He reasoned that these installations would create jobs and bring fresh produce into a poor urban neighborhood that desperately needed both. He even had ideas for reclaiming grey water for irrigation, and for the burning of garbage and sewage to produce electricity to power the operation.???

While vertical farming became the popularly perceived solution to urban food insecurity, it proved to have some serious flaws. It was basically a good but immature idea. Since then, innovators have been busy improving CEA with great success. Innovation has solved the following problems experienced with vertical farming except the last one: investor reluctance.

• Energy Requirements: Vertical farms use significant amounts of energy for lighting, climate control, and nutrient delivery systems. In fact, the energy used to maintain 24/7 grow lights is the largest expense component of a vertical farm even if energy-saving LED lights are used. This high energy consumption can strain urban energy grids and potentially contribute to greenhouse gas emissions, especially when the electricity is generated from fossil fuels. It can also cost so much that it puts the farm out of business, which it has done for many vertical farming enterprises.

• Financial Considerations: The initial investment required for establishing a vertical farm is substantial, encompassing infrastructure, technology, and specialized equipment. Additionally, the ongoing expenses of maintaining a controlled environment and managing energy usage can be prohibitive.

• Scalability and Production: While vertical farms optimize space utilization, their production capacity is limited by stacking, which requires shallow root chambers that only accommodate green leafy plants such as lettuce and others that have small root systems. Expanding vertical farming operations presents challenges related to energy limitations, labor availability, and the complexities of managing large-scale controlled environments. For example, each root chamber requires as many as 360 nozzles and sensors. This means a large facility might contain half a million nozzles and sensors. Nozzles clog and sensors fail. When this happens, plants die and in a large facility it can be nearly impossible to identify the precise component that is damaging production.

• Consumer Preferences and Market Dynamics: Consumer preferences for traditionally grown produce and the premium pricing of vertically farmed products can pose obstacles to widespread acceptance. As more vertical farming ventures enter the market, competition intensifies, potentially impacting profitability and long-term viability. Furthermore, a common consumer complaint is that CEA-grown produce doesn’t taste as good as traditionally grown. This might be because some hydroponic techniques combined with shallow root chambers inhibit the growth of microbiomes within the root ball. Microbiomes are part of what produces flavor and the other characteristics of a plant.

• Investor Bad Experience: New ideas, like vertical farming, often become the standard, initially perceived as the only viable option due to their novelty. However, innovation can uncover shortcomings in existing standards, leading to improvements. Most new concepts have room for enhancement. Although currently there are superior alternatives to vertical farming, their development is hindered by a shortage of venture funding because of the negative experiences investors have had with the financial performance of vertical systems.

While vertical farming presents a promising concept, its practical limitations suggest that the solution to food sustainability, particularly in underdeveloped countries, lies in a better system and less concern over urban renewal issues. After all, the problem to be solved is sustainable food production regardless of the difficulties presented by the environment such as desert or infertile soil. The problem is not urban renewal, although vertical farming is certainly appropriate for the urban landscape, but it doesn't feed the world. There is no shortage of barren land even within an hour’s drive from a major city. CEA can turn even the most forbidding locations into sustainable food production developments.? Urban renewal, while a noble goal, doesn't address the fundamental problem of feeding a burgeoning global population.

Vertical farming, while presenting challenges, also offers potential environmental benefits:

• Reduced Water Usage: Vertical farms often employ hydroponic or aeroponic systems, which use significantly less water than traditional soil-based agriculture. For example, hydroponics reduces the water used to 40% of that used in field agriculture. Aeroponics conserves even more water, using only 5% of that used in traditional farming. However,? the use of hydroponic systems in vertical farms can lead to nutrient pollution in waterways if wastewater is not properly treated. And the production of artificial fertilizers and pesticides used in vertical farms can also have environmental impacts.
• Minimized Land Disruption: By growing crops vertically, these farms reduce the need for large tracts of agricultural land, thus minimizing deforestation and habitat destruction. One drawback to urban locations is the expense of the land and buildings even if the site has deteriorated. Within a short distance of major cities, there's no shortage of barren land. Controlled Environment Agriculture (CEA) can transform even the most inhospitable locations into sustainable food production hubs. By focusing on CEA, we can harness technology to create optimal growing conditions anywhere, thereby increasing our agricultural output and reducing our reliance on traditional farming methods that are increasingly vulnerable to climate change.
• Lower Transportation Emissions: Vertical farms can be located within urban areas, reducing the distance food travels from farm to table and thus lowering transportation-related greenhouse gas emissions. The introduction of electric tractor-trailer trucks will probably remove this concern once they are in common use.
• Year-Round Production: The controlled environment of vertical farms allows for year-round crop production, reducing the reliance on seasonal availability and the need for long-distance transportation of out-of-season produce.

In conclusion, while vertical farming may offer a compelling vision for urban agriculture, its practical limitations and economic challenges cannot be ignored. The high energy costs, significant capital investments, and scalability issues raise concerns about its long-term viability and widespread adoption. Additionally, consumer preferences and market dynamics play a crucial role in determining the success of vertical farming ventures.

However, the potential environmental benefits of vertical farming, such as reduced water usage, minimized land disruption, lower transportation emissions, and year-round production, cannot be overlooked. There are currently other highly suitable systems that have been developed around solving the problems experienced by vertical farms and addressing their current limitations. These new systems can contribute to a more resilient and environmentally friendly food system, but the investment community must realize that vertical farms are not the only CEA systems that can solve the problem of food insecurity, and they are certainly not the best solution. The best potential investments are struggling to find venture investment while investors point to dismal returns from their earlier rush into vertical farms, which was always more of an urban renewal project than a way to feed the world.

Ultimately, a multifaceted approach that combines the strengths of various agricultural methods, including vertical farming, will be necessary to ensure food security and environmental sustainability in the face of a growing global population and increasing environmental pressures. As technology advances and consumer preferences evolve, vertical farming may play a more significant role in shaping the future of agriculture, but it is unlikely to be a standalone solution.