"Vertical farms are benefiting from declining operation costs. Reducing the 'levelized cost of electricity', combined with AI-driven automation advancements reducing labor costs, drives a lower operating cost for vertical farmers versus traditional farmers. The technology is getting more affordable, but also more efficient such as LED lights and their efficacy," says Peter Bachmann, Managing director of Sustainable Infrastructure at Gresham House acknowledging that indoor farmers are better positioned than open field growers.
Nemanja Rodic of Bloemteknik and Dickson Despommier
After touching down in London last year, the Vertical Farming World Congress settled down in Frankfurt am Main, Germany's fourth-largest city, also known as a commercial, financial, and high-technology center. Notably, the term 'bankruptcies' wasn't mentioned as frequently as we have heard over the past year. 'Does this mean we're out of the vertical farming bubble yet?' said a poll on the screen to which most of the participants answered, no, but the other half seemed to disagree with that standpoint. Let's see what the panels will teach us.
Taking up the position of vertical farms at this moment, Peter has seen the initial capex requirements decreasing. With a high upfront cost of 2000 GBP per m2, that seems to be lower now. "Vertical farms need to beat the price of field-grown cost. Being able to offer stable pricing for lettuce and other products year round provides a lot of potential for vertical farms to explore other products."
Paul Gauthier (University of Queensland), Tyrone Dickson (April Sun Farms) and Eri Hayashi (Japan Plant Factory Association)
Efficiency boost
'Fortunately, this turmoil' has made many operators scratch their heads and rethink their business model, farm operations, and such, pivoting to improved OpEx. That brings us to a highly favored word that was brought up in many discussions at the congress; efficiency. To achieve that efficiency, the main elements that should be taken into account are scale, production volume supply, fixed contracts for pre-determined pricing year-round, AI deployment (crop monitoring, disease detection and prevention, yield improvement), and must-have automation.
"10 years ago, vertical farms were run much less efficiently than nowadays," Dickson Despommier said. For instance, the cost of running a vertical farm on LED lights four years ago as opposed to today has become much more efficient. Which in some cases was thanks to a synergy of renewable energy and waste streams to boost this even more. Currently, access to renewable energy remains limited for many, but there is optimism that its accessibility will improve over time.
Ellis Janssen with Philips and Julia Erftemeijer with Artechno
As Gresham House has found, the key considerations and cost levers currently are; the initial capex requirements (high upfront capex cost of 2,000GBP per m2), farm operating costs, (primarily labor and electricity cost efficiencies, logistics (cost of transport and packaging produce), crop yield (beneficial impact to per unit cost economics). "In ten years, the overall cost of producing 1 kg of lettuce is expected to keep declining," says Peter.
Though, that might be easier said than done. Therefore, Peter lays out a few requirements needed in order to boost vertical farming growth in the short to medium term. "We have to make production more boring and just functional. Introduce low-cost project financing, access to renewables at the pace required, leveling cost of energy reduction, and providing conventional products."
"The incorporation of AI has tremendously helped to boost farming operations," says Dr. Chungui Lu, Professor of Sustainable Agriculture at Nottingham Trent University. It assists in communicating with sensors, monitoring plant health and early disease detection, and improving production as a whole which has caused operations to be much more efficient.
Hua Li with MechaTronix
Learning from the 'ancestors'
Asking about the main differences between the Japanese market and the rest of the world, Eri Hayashi, President of the JPFA comments that Japanese vertical farms have shown a combination of tight management, hygiene management, and growing consistently, at scale. Yet, that is easily said, she comments, as there's much more to it based on the geography and market needs.
Explaining how the JPFA helps domestic- and international companies enter the market Eri says, "At our campus, we're doing research for companies and combine that with academia. Through on-site workshops, JPFA is connecting operators with industry players, government- or municipality officials to prevent them from reinventing the wheel and help them either improve or start farming operations."
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