The downfall of Vertical farms
In 2015 the big new thing was vertical farming. “Vertical farming is going to feed us all” was the big promise of the technology. But it never really happened. And, is falling further and further behind on its promise as construction, energy, and repro material prices continue to rise. Unlike traditional agroculture vertical farms need cheap electrical energy to run the pumps that are at the heart of the technology. Indoor vertical farms spend around 60% of their revenue on electricity costs. According to Crunchbase, Indoor farming startups burned around a billion of venture investors’ money in 2022.
As of 2023, 16 vertical farming companies have gone bankrupt in the EU with the latest being Infarm, which launched in 2013 and has burned through $473m with nothing to show for it except empty promises. Now, they are continuing their grift in North America and the Middle East. In 2022 Infarm was all over the net with its claim it had succeeded in growing wheat and could produce the equivalent of 117 tonnes per hectare per year, or 26 times that of open-field farming yields. This, all of course has proven to be just a media spin. This circles back to the fact that Indoor farms can’t produce much more than lettuce, spinach, salad greens, microgreens, and the like.
Even AeroFarms, the darling of VCs all over the place and one of the first in the vertical farming space filed for Chapter 11 bankruptcy protection in 2023.
It was all good and dandy while energy was cheap. Even then the average cost of vegetables produced in indoor vertical farms was 3 times as expensive as “normal” greens.
Elsewhere, an analysis by US-based cooperative bank CoBank has shown that most vertical farming operations have yet to demonstrate profitability, with vertical farming’s breakeven cost of production per pound of leafy greens coming to $3.07 compared to only $0.65 for conventional outdoor farming.
For the average cost of around $30mil to set up a moderate-sized vertical farm you could run an 800-acre farm for 10 years without making a single dime.
800 acres would cost about $16mil, a $2-4mil for equipment and some $0.5mil to put the plants in the ground. On average, a four-crop gross income per acre is about $790, equating to $632,000 for 800 acres.
The big promise of vertical farming was that its footprint is much smaller and that you can produce the equivalent of a large farm in a warehouse but that has also fallen short as again, such farms use far more energy than traditional farms proving them less than “green”. While traditional farms rely on readily available power sources also known as the Sun, and can be seen as the ultimate solar collectors, indoor farms consume electrical energy. Even if they use solar panels they lose over 70% of the power that traditional farm collects as solar panels are at best 20-30% efficient and will need to be replaced in a decade or two.
Wheat cultivation takes more than 216 million hectares of land, more than any other crop. To satisfy current needs at Infarm’s projected yields would require indoor farms exceeding the area under wheat in France.
My opinion is more in line with the Crunchbase article, “VCs Plow Money Into Indoor Farming, But Open Fields Might Be More Ripe For Innovation”. Traditional farming has a proven record of surviving for over 5,000 years with little innovation with the biggest being the introduction of modern chemical fertilizers methods.
The major selling point for indoor farms is not their yield but their reliability. Unlike traditional farms, they are not affected by weather or infestations by insects or diseases but as discussed, that comes at a cost of increased, and constant use of electricity.
The initial excitement surrounding vertical farming in 2015 has given way to a sobering reality in 2023. The grand promise that vertical farming would revolutionize agriculture and feed the world has not materialized as expected. Vertical farming companies once hailed as pioneers, are facing bankruptcy and struggling to prove their profitability.
With all of the economic inefficiency of vertical farming, it becomes clear that traditional farming, despite its reliance on age-old methods, continues to be a more viable and cost-effective option. The allure of vertical farming has not lived up to its initial promise, and the agricultural industry may be better served by seeking innovation within the well-established practices of outdoor farming.
With one caveat, actually two. One is a personal indoor garden.
This way every household grows its own greens. A pipe dream but it’s an option. This would also decrease food waste as “roughly one-third of the edible parts of food produced for human consumption, gets lost or wasted globally, which is about 1.3 billion tons per year.”2 And, that food waste is mostly generated in urban areas. Rural areas already have local suppliers if not homegrown.
And second is hydroponics. Most proponents of vertical farming are touting its water saving as one of its benefits and that hydroponics uses a lot of water, which is true. But, once you fill the beds with water hydroponics system is complete as water is recirculated with much less waste and power used.
While vertical farming has its merits, it still has a long way to go to prove its viability and sustainability in the face of rising costs and energy demands. The age-old practices of traditional farming, with their proven track record, might indeed be more ripe for innovation.
https://www.bloomberg.com/news/articles/2022-11-09/wheat-grown-indoors-offers-potential-for-global-food-security
https://www.fao.org/3/mb060e/mb060e02.pdf