Take home messages:
- Vertical farming potentially addresses many of the growing issues with food security due to decreased land use and better protection against extreme weather events, which could otherwise cause multiple crop failures.
- The industry has expanded rapidly over the past decade, but many large-scale businesses are struggling due to high startup and running costs, a lack of experience and scarce reliable industry data.
- Potential technological solutions could help, such as switching to renewable energy, but business models which start small and gradually grow their customer base could be more financially sustainable.
Over the past two decades, the vertical farming industry has experienced enormous growth, with the size of the global market having passed 4.51 billion USD in 2020 by one estimation. The industry has been extremely attractive to investors due to the possibility of mass sustainable agriculture, largely driven by focusing on the reduced land area and water used to grow crops compared with traditional farming, due to the stacking of crops and controlled indoor environment. This, in turn, could allow for a much larger output of crops per square metre than traditional farming, and allows for more crop cycles per year. Reducing the land and water used to grow crops is especially important given that an average of around 80% of water resources are used for agriculture worldwide.
The reduced land area also allows for vertical farms to be more easily constructed in urban areas, which could potentially reduce food miles and allow for locally produced crops to be more easily available to those living in cities. This could be vital as the proportion of the world’s population living in urban areas has increased drastically from 30% in 1950 to around 55% today, and is estimated to reach 68% by 2050. Controlled Environment Agriculture (CEA) more generally also allows for a reduction in the use of pesticides and fertiliser, which are major sources of agricultural pollution. CEA farms also protect crops against weather conditions which may disrupt or ruin crop cycles in traditional farming, which is especially pertinent given that climate change is making weather patterns more extreme and less predictable. Furthermore, these extreme weather events are likely to exacerbate already existing issues of food security. In 2022 it was estimated that hunger impacted 691 to 783 million people across the world, and that number will increase unless crops can be protected from environmental factors.
However, vertical farming is not without its drawbacks. The high energy costs of running vertical farms have often been cited as both a financial and environmental drawback, depending on the source of energy used. Additionally, large-scale vertical farms are often expensive to set up and the cost of labour can also be unexpectedly high due to the complexity of running these facilities. These factors are exacerbated by a lack of access to subsidies which are available for traditional farms, which results in much smaller profit margins. This results in a misalignment of expectations from investors who are expecting large returns, and thus invest millions for ventures to set up large facilities. As such, many large-scale vertical farms are not profitable even after years of operation, which has recently resulted in many of these larger companies ceasing operation, laying off large numbers of staff or rethinking their production strategies in an effort to become profitable.
This has, in turn, led to a perception among some that vertical farming is a “bubble” which attracted millions from investors due to promises of extremely high yield, but has failed to become profitable and was only financially sustainable due to income from outside sources. Given the potential for vertical farming to address many of the issues facing the agricultural industry, it is worth examining the current situation and potential solutions to these problems. However, much of the literature critical of vertical farming focuses on large-scale ventures. As such, it is also worth examining if many of the issues of the industry are a result of a “top-down” approach, trying to build vertical farming facilities too large and too quickly, rather than building financially viable businesses and a large-scale knowledge base from the ground-up. Furthermore, potential changes to attitudes and the availability of resources for vertical farmers should also be considered, as climate change will inevitably make the current food system much more vulnerable.
The Scale of Issues Facing Traditional Agriculture
As discussed above, the current food system is already struggling to feed the current population, and the situation is likely to get much more difficult as the population increases. For instance, unless there is a severe reduction in meat consumption, it has been estimated that by 2050 annual cereal production will need to increase by around 50% and meat production by 135%. To accommodate this increase in production, in 2019 it was predicted that an additional 593 million hectares of farmland will be needed to feed the global population by 2050, which is an area roughly twice the size of India. Expanding farmland into an area that size would undoubtedly devastate many natural ecosystems, including forest and rainforest environments which play a crucial role in taking carbon dioxide out of the atmosphere.
However, the amount of land available for agriculture is also decreasing, with one study finding that around 80% of the world’s arable land is experiencing some form of land degradation, and 17% suffering from more than one form simultaneously. The most common forms of land degradation were found to be increasing aridity and soil erosion, with around 40% and 20% of arable land being affected by these factors alone and around 7% simultaneously. A report by the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services also stated that between 2000 and 2009, land degradation was responsible for annual global emissions of 3.6–4.4 billion tonnes of CO2. The report also found that increased land degradation and the associated losses in GDP due to decreased food production corresponded with a significant increase in the likelihood of conflict.
Recent events have also shown that the global food supply chain can be vulnerable to conflict as well as being a potential cause. As of 2022, Ukraine was the 9th largest producer and 5th largest exporter of wheat, and several countries relied heavily on Ukrainian grain imports, with Pakistan and Lebanon importing 49 and 62% of their grain from Ukraine respectively as of 2020. As a result of the Russian invasion in 2022, wheat prices increased in almost every country across the world by around 2%, which exacerbated issues in countries already facing food insecurity. In fact, it is only the result of reallocation efforts by countries such as the USA and Australia that price increases were limited to 2%, as some earlier predictions forecast up to 50% increases in some countries. In addition to the Russian invasion of Ukraine, recent years have also seen the impact of COVID-19. According to the World Health Organisation, the proportion of the global population suffering from hunger had remained relatively stable since 2015, but between 2019 and 2021 it increased from around 8% to 9.8%, an increase of 150 million people.
In addition to the pressures caused by an increasing population, constrictions in the food supply chain and decreasing arable land there is also the threat of synchronous extreme weather events. Extreme or unseasonal weather events such as droughts can, of course, cause a substantial loss in crop production in the impacted region. Such weather events are becoming more common around the world due to the impacts of climate change. For example, one model found that the probability of experiencing a peak hottest month in a given year, and the severity of that hottest month, has been found have increased in over 80% of the land areas studied.
However, while these events can be devastating locally, a more damaging prospect is if multiple countries are impacted by extreme weather at the same time. This is particularly worrying if those countries are so-called “breadbaskets”, i.e. a major producer and exporter of staple crops that feed a significant portion of the global population. Models have already shown that global scale climate patterns such as the El Niño Southern Oscillation are responsible for substantial fluctuations in the yield of many staple crops across multiple regions.
Some research has also found that the chance of synchronous extreme weather events is also increasing. For example, one 2018 study investigated the chance of a simultaneous loss of maize production of 10% in the top 4 maize exporting countries. The current chance for any given year was close to zero, but increased to 7% with global warming of 2 °C and to 86% under a warming of 4 °C. Another study found an increasing risk chance of simultaneous crop losses in the largest breadbasket countries had increased for wheat, maize and soybean, with wheat showing the largest increase. The study did also find that the chance of simultaneous crop losses of rice has decreased, largely due to more favourable solar radiation conditions. The model also predicted that, overall, the risk of crop yields being reduced by extreme temperature events seemed to be larger than by unfavourable precipitation.
This is particularly troubling as crop yields have already been predicted to decrease due to increasing global temperatures, and extreme weather events may further exacerbate this problem. One model predicted that global crop yields of wheat, rice, maize, and soybean may decrease by 3.1 to 7.4% for every degree Celsius global temperature increase. Furthermore, one recent study suggests that previous models may have underestimated the likelihood of synchronous crop failures caused by extreme weather events due to changes in the jet stream. Previous research had already modelled the impact of Rossby waves on the likelihood of synchronous weather events.
In basic terms, Rossby waves are meanders in the high-altitude winds that occur in the planet’s atmosphere, such as the jet stream, and are caused by the planet’s rotation. Due to climate change, these meanders are becoming more extreme and essentially causing the high-altitude winds to become “stuck”. In the case of the jet stream, if such a meander takes place, it could cause large-scale yield losses to multiple crop-growing regions across the northern hemisphere in Europe, Asia and North America to experience extreme weather events and large crop losses simultaneously.
Any event which causes the simultaneous reduction in crop yield across multiple countries is likely to cause sharp rises in the price of grain, and in turn result in increased economic and political instability. Grain exporting countries are likely to impose export restrictions, putting even more pressure on developing, grain-importing countries as the price of imported food increases further. The potential impacts of simultaneous crop loss in multiple bread baskets are likely to be amplified by the pre-existing vulnerabilities in the food system discussed earlier. As such, there is a desperate need for agricultural systems that are not dependent on weather conditions to maintain food security, and which reduce the land and water needed to do so.
The Potential of Vertical Farms
Given the challenges facing traditional agriculture grown above, vertical farming does have many advantages over traditional agriculture. The three most often discussed are reductions in water usage, increase yield given the land area and the advantages of a controlled environment. Beginning with water usage, the hydroponics systems used by most vertical farms have been estimated to use up to 97% less water per kg of lettuce grown compared to traditional farms, and by 28 to 95% compared to greenhouses. Given that increased aridity and desertification are some of the largest factors leading to a loss of arable land, these systems are highly advantageous, and are likely to become more so in areas experiencing long-term droughts and water shortages. Hydroponics systems also make the use of fertilisers more efficient compared with traditional farming, which could help reduce carbon emissions through reducing the need for fertiliser production.
The second advantage is the reduction in land usage. Most literature and vertical farming companies state that vertical faming can produce many times the quantity of crops per unit land area compared with traditional farming. However, the scale of these claims differs by orders of magnitude between different sources, with some large-scale vertical farming companies claiming that they can produce yields hundreds of times more food per unit land area than traditional field farms. Nevertheless, even at the lower end of the scale, a 10 to 20 times reduction in the area needed would be extremely beneficial given predictions of the extra land needed to feed the growing human population and the current losses in arable land.
Finally, there are the advantages of the controlled agricultural environment. These environments allow for a massive reduction in the use of pesticides, which further decreases water usage as produce may have limited requirement for post-harvest washing. The closed, indoor environment also lowers the risk of pollution such as fertiliser runoff, in combination with the lower quantities of fertiliser needed. Controlled indoor environments also allow for crops to be grown under consistent conditions, resulting in less variation in size, growth rate and so on. They also allow for these conditions to be adjusted to be better optimised for different crops.
These conditions also allow for plants to be grown year-round, which could reduce the need for crops to be imported outside of a country’s typical growing season. The lack of need for arable soil and the reduced land area means that vertical farms could be set up in urban environments, closer to most of their customers. This, in combination with potential reduced imports, could reduce carbon emissions by reducing the distance food needs to be transported. The transport of food may only make up a small portion of the total emissions caused by agriculture, around 6% in the EU for example. However, any reduction in global carbon emissions is still beneficial.
Perhaps the most important benefit of controlled environment agriculture, however, is protection from external environmental conditions. This factor is often stated in the literature, but more emphasis is often placed on water, land, and energy usage. Given the threat posed by synchronous extreme weather events discussed above, the ability to protect a significant portion of the global food supply from crop failure could prove vital in keeping food prices under control and, more crucially, saving people from starvation and conflict.
Drawback of the Large-Scale Vertical Farming Industry
Despite the great potential of vertical farming, several issues have held the industry back from fulfilling its full potential. One of the largest is simply the lack of readily available data and information, which has been noted by several authors. Vertical farming companies are reluctant to share their data concerning various aspects of their business, possibly due to fears of competition. There have been some initiatives to build a better overall picture of the industry, such as the CEA Census conducted by Agritecture. However, even in the 2021 edition of this project, they noted that while most CEA companies stated they collected data on energy and water usage, less than half of the companies provided credible data to the census.
The lack of information about the industry influences makes it difficult to build up a core knowledge base, and as such there is a lack of standards across the industry, which in turn has resulted in a lack of best practices regarding the hiring, training and management of staff. This is exacerbated by a lack of experience within the industry. The CEA census has consistently found that a large proportion of CEA founders have no prior experience in farming. The census has also found that older CEA ventures tend to be more likely to be profitable. This makes sense, as older ventures will have more experience in dealing with various issues and are more likely to have established a list of companies they supply with produce. However, for the industry to grow it is vital that these older companies are willing to share their experience and data so that new startups have a clearer picture of what to expect, especially as, by some estimates, around 85% of vertical farms fail without further investment of capital. The lack of readily available knowledge and standards also means that may vertical farming companies spend large amounts of time and money on research and development (R&D) to investigate crop growth recipes and optimised growing conditions, often while the company is trying to grow crops and scale up production.
A lack of understanding of the limitations and complexities of vertical farming may have also caused unreasonable expectations among investors and founders of large-scale vertical farming ventures. The idea of a revolutionary new technology that could produce tens or hundreds of times the yields of traditional farming with less land and water is an exciting prospect. This has reportedly led to billions of dollars in investment over the past few years, and some large CEA companies have used this money to build facilities which can cost tens of millions of dollars to set up, even after improvements have substantially reduced the price of these farms.
However, despite their high yield, the reality is that large-scale vertical farms can be incredibly complex and expensive to run. For instance, one study examined the cost of running vertical and traditional lettuce farms in seven alternative locations in the USA. The average of these results showed that while the cost of land and water is many times lower in traditional farming, these savings are outstripped by the additional costs of energy and labour. Many farms reportedly struggle to make a 10% return on investment for their investors, and the majority of surveyed indoor vertical farms in 2020 were either in a pre-revenue stage or made less than $10,000 in revenue.
Furthermore, although any type of crop can hypothetically be grown using vertical farming, only a small number of crops are grown by most vertical farms due to being the most economically viable. A 2019 survey showed that only herbs, salad greens, microgreens and other leafy greens were grown by more than 40% of vertical farms. These crops do have nutritional benefits in the form of high fibre and vitamin content, but they are not staple crops that can support a population, nor are they a significant contribution to the land-use problems caused by agriculture.
The high energy demands of vertical farming are mostly due to the grow lights used in place of sunlight. Despite advances in LED technology potentially being one of the factors which has increased interest in vertical farming, one study assessed that artificial lighting in the form of LEDs make up 65 to 80% of the primary energy consumption in vertical lettuce farms, followed by the heating, ventilation and cooling systems. This study also found that energy consumption varied substantially between cities, primarily due to the efficiency of the electrical grid system. However, it is worth noting that the cost of electricity between countries varies significantly both in raw monetary terms and when comparing using the purchasing power standard.
| Category | Subcategory | Most Commonly Reported Risk | Percentage of Farms |
| Environmental | External | Flooding (the facility being flooded) | 27.1 |
| Environmental | Internal | Irrigation (irrigation systems not supplying nutrients) | 33.6 |
| Financial | External | Funding risk (inability to secure funding) | 16.8 |
| Financial | Internal | Misalignment of investor expectations | 19.6 |
| Labour | External | Shortage of skilled labour | 13.1 |
| Labour | Internal | Human error (mistakes by staff causing reduced crop yield) | 53.3 |
| Market | Internal | Supply chain risk (due to damaged consumables) | 13.1 |
| Political | External | Geopolitical issues | 6.7 |
| Political | Internal | Landlord dispute (change in terms causing relocation) | 10.3 |
| Production | External | Electrical outages | 6.6 |
| Production | Internal | Physiological disorders (defects in the plants) | 30 |
| Technology | External | False information provided by supplier/vendors | 13.1 |
| Technology | Internal | Equipment failure | 33.6 |
While energy can be expensive, labour costs may be the largest cost to vertical farms. The complexity of vertical farms often requires highly skilled staff with multidisciplinary expertise. This complexity is often underestimated by new startups, and so the cost of labour is higher than expected. For large-scale farms to be managed efficiently, there is a need for those with expertise to be in senior positions. However, as stated earlier, many vertical farms are started by those without any experience in the agricultural sector, and as such they may need to outsource these positions, which could be expensive. That said, vertical farms also require some employees to perform relatively simple and repetitive manual labour tasks, especially during seeding, transplanting and harvesting. As such, there is a potential opportunity to save money by using low paid or volunteer staff. However, this potentially increases the risk of reduced yields due to mistakes by farm workers, and human error is reportedly the most common risk of any category reported by vertical farms.
Overall, the lack of reliable data for the vertical farming industry makes it difficult to assess how many of these large-scale farms are financially sustainable, and what practices the profitable businesses have undertaken which allow them to continue operation. This, in turn, makes it difficult to assess the associated risks in starting or investing in these vertical farming projects. Some resent research has tried to model the potential for financial sustainability in vertical farms, such as one study which created a model for a real UK vertical farm and a hypothetical farm in Japan. This model revealed the latter scenario was much more likely to have a profitable business within 15 years. However, the authors also acknowledged that more real-life case studies will be needed to validate any risk assessment models.
Potential Technological Solutions
A number of technological solutions have been proposed to try and address the high running costs of vertical farms and offset the high startup expenses. One way to reduce electricity costs could be the use of renewable energy sources. This has the added benefit of helping reduce the carbon footprint of vertical farms, though whether this reduction causes vertical farming to have a smaller carbon footprint than traditional farming varies between studies. For example, one study found that the carbon footprint of a vertical farm was around 16.7 times greater than an open field farm, and would still be around three times greater in an alternative scenario which accounted for lost carbon through land use and a transition to renewable energy. This is contrasted by another study which found that although a vertical farm using the current UK grid system would cause around twice as many emissions as a traditional farm, the use of blue hydrogen (natural gas produced through carbon capture) would cause the vertical farm’s carbon footprint to be lower, and the use of fully renewable energy would have an even greater impact.
Despite using different styles of vertical farming to simulate their analyses, in scenarios where renewable energy are used both studies estimate a relatively similar kg of CO2 per kg of lettuce produced (1.797 and 1.57 in study 1 and 2 respectively). Additionally, in both studies the estimated kg of CO2 per kg of lettuce produced using renewable energy was much lower than the current situation. In study 1, the vertical farm produced 8.177 kg CO2-eq kg−1 using the current electricity supply, compared with 1.797 kg CO2-eq kg−1 using renewable sources, while in study 2 the current supply resulted in 10.8 kg CO2-eq kg−1 versus 1.57 kg CO2-eq kg−1 using renewables. However, the studies differ greatly in their estimations of carbon emissions from traditional farming, primarily due study 2 estimating a much larger impact due to deforestation. In study 1, open field farms were predicted to cause 0.544 kg of CO2-eq per kg of produce when the loss of carbon due to changing land use is considered, compared with 5.05 kg in study 2 when the impact of deforestation is included, which made up 3.913 kg of these emissions. These differences highlight how varied the estimations of emissions from agriculture can be depending on which factors are prioritised for a given study, which could influence the decisions of investors, founders and policy makers when determining their support of vertical farming ventures.
While using renewable energy may drastically reduce the carbon emissions from vertical farming, the indirect land area required to power the farms may often be greater than the total land needed for greenhouses or open fields. Further research also assessed the land needed to grow various crops using renewable energy in vertical farms, and found that land use was only reduced when growing lettuce given current renewable energy technology. However, as renewable energy becomes more widespread, the impact of vertical farms on the power grid will need to be accounted for. One study modelled the potential impact of urban vertical farms into a future model of Helsinki powered entirely by renewable energy. The authors found that for every 100 ha of vertical farming, local power consumption could increase by 20% while substantially reducing power exports. The study did not state how large an area of vertical farms would be enough to sustain the entire population of Helsinki, though this would depend on the which crops were grown. The study also modelled the impact of demand response control systems (which switch to using power when electricity is more plentiful) vertical farms and found that this can reduce the energy consumption by 5 to 30%. The savings tended to be greater for plants with a shorter photoperiod, as this more easily allows the vertical farms to skip peak periods of energy consumption.
Another potential way to save energy is to increase the efficiency of the lighting systems used to grow the plants. Several strategies have been proposed or are being investigated by researchers. For example, increasing the photosynthetic photon flux density (i.e. the intensity of the light and therefore the amount that hits the leaves of the plants), has been found to increase plant growth, but also causes a significant rise in energy costs. Other potential strategies include using laser diodes to shoot light directly onto specific leaves, inter-cropping (simultaneously growing several crops) to ensure a closed canopy and using localised air circulation to avoid areas of stagnant air to ensure even crop growth. However, these are mostly potential future technologies, and therefore unlikely to enable stabilisation of the vertical farming market in the short-term.
Regarding labour expenses, one of the most often cited ways to reduce cost is through increased automation. The main aim of introducing automated systems is increased efficiency and reduced costs. A reduction in the human workforce needed means that fewer staff will need to be paid, and, if the systems are reliable, then typically tasks can be completed faster and more consistently due to the lack of human error. Most vertical farms surveyed were equipped with environmental sensors and controls as of the 2021 CEA survey, and most have also automated the basic growth of the plants, meaning that the basic cycles of lighting, pH control and nutrient delivery could be maintained without human involvement.
Larger-scale vertical farms have also begun investing in new technologies such as robotics. The use of robotics systems to perform tasks which require the handling of crop products could be highly advantageous in large systems, as concerns surrounding human health, safety and comfort would be less of a concern, which could allow for environmental conditions which are potentially more optimal for plant growth and less space would be needed to accommodate human movement through the farm.
However, while automated seeding and transplanting technologies already exist, harvesting robots still have a low success rate and often damage the produce and other parts of the plant. Research is currently ongoing to improve the ability of automated systems to recognise harvestable crops such as using deep learning technology, but for now automated harvesting technology is not commercially available. The use of computer technologies such as deep learning and AI has also been explored for other areas of commercial farming. For example, sensor-based AI systems could be used to help generate computer models which can then control the various environmental control mechanisms to regulate growth rate and ensure consistent product quality. Other uses of AI such as scheduling harvests to maximise food production and the detection of plant diseases have also been explored.
That said, the introduction of automated systems can be expensive, and require the hiring of staff with high degrees of technical knowledge to maintain the hardware and software needed. As such, many aspects of automation may not be appropriate for smaller farms. This is important because, despite much of the literature surrounding vertical farming focusing on large-scale projects, majority of CEA operations reportedly only have a single farm and employ 1 to 3 people. As such, it is worth analysing whether the technical solutions reported above are appropriate for small-scale farmers, and whether these farms have their own potential advantages compared with larger operations.
Alternative Business Models and Socio-political issues
Vertical farming is a relatively young industry, and as discussed above there is limited data available surrounding best practices, operational costs and potential returns on investment. As such, investing millions of pounds into large-scale facilities is a large risk, especially as increasing the size of an operation inevitably increases its operational complexity and operating costs. An alternative approach would be to start small and gradually expand the business as the operators gain experience and increase their profits. This approach also allows small-scale farms to build up a trusted customer base over time, which means they have a solid base of clients who regularly buy their products which can help build their reputation and help them expand. One example of this approach is Lusso Leaf, a company which began in the garage of its owner before gradually expanding out to a an old mushroom factory and is now supplying upmarket supermarket chains.
The idea of starting small and only spending a small amount of money while developing a product and testing to see if there is a viable market is not just a strategy restricted to small-scale farmers. A recent article penned by a staff member of Eden Green, a large-scale US vertical farm, highlighted how finding a viable market for products first is vital for successful business ventures. However, several large-scale vertical farms have attempted to build these businesses in reverse, investing large sums of money into huge facilities without working out if they have a profitable product based on production costs and volume of sales. Hypothetically, large companies could take advantage of the economy of scale to sell their produce at more competitive prices, which could leave smaller ventures at a disadvantage. However, due to the high startup and running costs of these facilities, even larger scale companies must sell their products at a premium compared with traditional farming to try and become profitable. As such, creating large, expensive vertical farms that with high running costs that produce large quantities of premium produce, without knowing if there is a large enough mark for those premium crops, may be putting the cart before the horse.
Smaller-scale farms primarily focus on growing microgreens, which are small, young plants usually harvested shortly after the first true leaves have developed, and are used primarily to enhance the aesthetics, texture and taste of foods such as salads. Although there is a large focus on vertical farming being a high-tech business, small-scale farms can have considerably less automation. While many use automated hydroponic watering systems, there are also many examples of vertical farms where even plant watering is done by hand. That said, some degree of automation is probably beneficial for even small-scale growers, as it can still save time and labour costs and allows for crops to be grown in a more consistent environment.
While large-scale farms often create large customised systems for growing and monitoring their crops, smaller startups will likely benefit from off-the-shelf systems which are easy to set up and require less R&D (though some is still expected as new growers experiment with different equipment, layout, media and so on to optimise their yields). These items are also substantially cheaper than the setups of many large-scale farms, often ranging from the hundreds to thousands of pounds rather than stretching into the millions. Nevertheless, the continued development of simple and affordable systems will be important in lowering the barrier of entry for new small-scale vertical farmers. Prototypes of these technologies are being developed by researchers, such as modular hydroponic and rack growing systems that can be easily assembled by farmers and used to grow plants of different sizes. Another example is the use of the Internet of Things technology to integrate information from multiple sensors, thus automatically monitoring and controlling key environmental conditions and automating parts of the growing processes such as nutrient delivery.
These sensors can also potentially be used to gather data to optimise growing conditions, including balancing the exposure of plants to LED lighting systems while minimising energy usage. This may be an important factor for small-scale vertical farms, as according to the 2021 CEA census, small-scale CEA facilities tended to use more energy per kg of produce than larger facilities. This may make investing in renewable energy attractive for small-scale farmers, and some of these operations already state they operate using 100% renewable energy. A 2022 study compared the resource efficiency of small-scale vertical farms and soil-grown methods to grow Swiss chard, and found that growing plants hydroponically under sunlight was much more energy efficient than hydroponically growing plants under LED grow lights. However, the same research also found that even at small sales, vertical hydroponic farms were significantly more efficient in land and water use. As such, the balance between water, land and energy use remains an issue in both small and large-scale vertical farming.
That all said, data which compares the financial viability of different types and sizes of vertical farms is severely lacking. Some researchers have created models to try and map the potential costs and profitability of vertical farms (such as the Vfer model) or to estimate the risks of different levels of return on investment (such as the Vertical Farming Wizard decision support system) under different circumstances. However, real-life information comparing the profitability of large- and small-scale farms in different environments is extremely scarce. As such, it may be the case that many small-scale vertical farms also struggle to maintain profitability. The difference is that when large-scale endeavours struggle or collapse, it is more newsworthy due to the large initial investments and the number of people who are directly impacted. In a sense, this could be an advantage of smaller-scale farms. If large business fails, then it has a potentially has a large impact of the local supply chain and can cost investors millions of pounds. If a smaller farm closes, then the loss may be more affordable to both investors and impact a smaller number of other businesses.
Smaller-scale farms could also help alleviate some of the negative public perceptions around vertical farming. Research has found that many individuals distrust CEA and vertical farming due to the lack of soil and sunlight, perceiving the process as “too artificial” and the produce as “lab-grown crops”. Though the strength of this perception varies between countries, it is not helped by organisations such as the UK soil commission who not only believe hydroponics should not be considered organic, but campaign for other organisations to not consider the process organic either. Large-scale startups creating huge facilities that are sometimes called “plant factories” is probably not helping this image and may fuel the idea that this CEA is driven by big tech companies in competition with traditional and local farmers.
Indeed, some research has found that some people within local communities are concerned that large vertical farms may fundamentally alter local neighbourhoods for the worse by contributing to processes such as gentrification. There is currently little evidence or research which suggests that these concerns are well founded, and indeed another paper found that most of the jobs provided by vertical farms constructed in New York were low-wage, entry level jobs such as packing and handling, which implies that large-scale farms may have the opposite problem, not providing enough economic development to the local area. Regardless, in combination with scepticism about vertical farming’s organic credentials, these attitudes show a level of animosity for large-scale farms in local-growers and some in the general public concerned about natural, organic produce.
However, small-scale farms could be integrated into already existing food projects. Their reduced size means that they can more easily fit into urban environments, which could allow them to be adopted as part of allotment and greenhouse projects within cities. Perhaps more importantly, they could be easily fitted into barns or other buildings on pre-existing farms. This could provide farmers with an additional source of income by producing microgreens or salad vegetables alongside, and by adopting the automated growth and monitoring systems discussed above they could potentially do so without having to hire any additional staff due to a minimal increase in the labour required.
The addition of vertical farms to pre-existing farms may also be beneficial in helping to adapt the technology to a greater variety of crops. Given the current restrictions in energy cost, these farms will likely grow similar crops to most vertical farms. However, as the climate becomes more unstable traditional methods of growing staple crops will become less reliable, and there will be a greater need to grow crops in a controlled environment. If farmers are already familiar with growing some crops using vertical farming, it may allow them to transition more quickly to cultivating a larger selection using CEA.
Currently, growing these crops is usually not financially viable for most large- or small-scale farms. However, it is worth remembering that governments already spend a large sum of money in farming subsidies, and often farms are not financially viable without them. In the UK, it has been estimated that one third of farms would have made a loss without direct payments by the government, and the average net profit was only £22,800 as of 2022. Meanwhile, the EU spends around 30% of its budget on the Common Agricultural Policy, the majority of which is spend on direct payments to farmers and market interventions. As such, while financial assistance may be needed as vertical farms are constructed for a larger range of crops, this is by no means unprecedented in the agricultural industry.
Apart from adapting vertical farms for staple crops, there may be an opportunity for vertical farming to be used to grow crops for pharmaceutical purposes. A small but significant portion of vertical farms already grow cannabis plants, and CEA farms have been assessed to be generally better suited to growing biopharmaceuticals than open field farms. This is because the tightly controlled environments can result in less variation in the crops, and thus more consistent yield of pharmaceutical products. While this would not fundamentally resolve the high energy and labour costs of vertical farming, or their inability to produce staple crops at scale, it could be a way for farms to produce revenue more quickly, especially if they also produce crops for human consumption. However, restrictions around the cultivation of genetically modified organisms may restrict farms to plant which naturally produce medically useful compounds in some jurisdictions.
Summary
Vertical farming continues to be an exciting new industry, and one that has the potential to play a vital role in food security in the next few decades. However, the industry faces several key challenges which must be overcome if it is to reach its full potential.
The controlled environment of vertical farming allows for better protection against extreme weather events which have the potential to cause a massive reduction in crop yield across the world, particularly if they impact multiple breadbasket regions simultaneously. These events, on top of the already existing pressures of decreased crop yield due to increasing temperatures, decreasing arable land through aridity and soil degradation and an increasing population, could be calamitous for the global food system, and lead to the deaths of millions of people through starvation and conflict.
However, many large-scale vertical farming projects are either failing or facing uncertain futures as they struggle to make a profit. This has been driven by founders and investors who have overestimated the profit margins on the crops they grow while underestimating the complexity and running costs of the expensive, large-scale facilities they set-up. These factors are exacerbated by a lack of agricultural experience among a large portion of operators, and a scarcity of data available to develop best practices and guide those who are new to the industry. Potential technological solutions to these issues such as more efficient lighting and robotics are largely hypothetical and may take years and large R&D costs to be implemented.
As such, it may be the case that smaller scale farms are more tenable, as they have a much lower upfront cost. This can allow them to start small and gradually build up a regular and reliable customer base from which they can then expand. These smaller farms may also have a better reception with those who are sceptical of vertical farms than larger companies. These setups could also be integrated into pre-existing farms as a supplementary source of income, with the possibility that they are expanded as traditional farming becomes less tenable. Off the shelf equipment that is affordable and easy to use may also aid in expanding vertical farming, as it would allow the practice to be more accessible to a wider range of people.
Currently, only a small number of crops (mostly microgreens, salad greens and other leafy vegetables) are grown most vertical farms both large and small. Eventually, however, vertical farming will need to be able to grow more staple crops. The cost of energy remains one of the largest barriers to vertical farms of all sizes, but as environmental pressures mount on the food system, governments may become more willing to provide subsidies to allow vertical farms to remain profitable to prevent crop collapse. For the moment, however, a greater degree of transparency and readily available data within the industry is desperately needed to better assess which models of vertical farming are sustainable and why, and whether these methods can be upscaled as businesses expand.
March 2024