The energy crisis claims many victims. One of them could be high-tech vertical farming. In this sector, electricity costs for lighting account for up to 70 % of total costs, depending on the technology. In view of the skyrocketing electricity prices, this could be the death knell for the industry. The main survivors will be those who generate their own electricity cheaply (e.g. with solar).
Oscar Davidson, specialist at LettUs Grow, a technical outfitter for vertical farms, says: "Electricity accounts for an average of 40-50% of production costs in vertical farming. Therefore, securing a stable energy price is key to success."
Lighting, temperature, ventilation, irrigation, and other technical operations are all powered by electricity, whereas in traditional greenhouses gas is often the primary energy source. Depending on the technology, energy costs can account for up to 70 % of total costs in individual cases, research shows. Many vertical farms are therefore caught cold by the price explosion in electricity.
"I have just received notification that my daily electricity tariff is going up from 23.23p/kwh to 31.24p/kwh, an increase of 31%," said Peter Lane, Executive Chairman of the Vertical Farming Network a few weeks ago. "How many genuine closed vertical farms can afford this kind of increase in their most basic resource costs?" asks Lane with concern.
Cindy van Rijswick agrees. She is an analyst at Rabobank. Rijswick tells the online portal Shifted that electricity is the most important cost for vertical farms. Last year, she wrote a study that electricity accounts for at least 25% of business expenses.
However, this estimate was made before Europe faced rising energy costs due to the war in Ukraine. "The costs will be much higher now," she says, "and energy prices keep going up."