The way we grow food today is unsustainable. We are depleting our planet’s resources at a fast pace and food security for a growing population is at risk. How we use our finite land efficiently is one of the most important questions facing us today. There is one approach that we believe can help provide a more sustainable and resource-efficient solution to this vital issue – vertical farming.
This article was originally published on 12 June 2020 on Thinking Aloud.

Vertical farm documentary

In this short video, we visit Scotland’s first vertical farm. Intelligent Growth Systems operates an indoor plant-growing system that reduces water usage by 95%, avoids the need for pesticides and requires no sunlight.

Food production today – what is the problem?

Producing food is resource intensive in terms of water, energy and land. We are using natural resources quicker than the planet can regenerate. The last Earth Overshoot Day – the day we deplete nature’s resource budget for the entire year – was 29 July 2019. This is the earliest on record. Additionally, the use of pesticides has negative implications for biodiversity and health.

Food production is also vulnerable to the growing physical impacts of climate change. Warming temperatures cause heavier rains, leading to land degradation, water scarcity and soil erosion. This affects harvests and diminishes crop yields.

Vertical farming – a potential solution

Enter vertical farming (VF). As it sounds, VF is the practice of growing crops in vertically stacked layers indoors. VF seeks to optimise growth conditions for each plant and apply these conditions in a controlled and fully automated environment. This maximises yield and minimises environmental impacts. Vertical farms are best suited to herbs and leafy vegetables that do not grow too high or too deep in the soil. That means you can stack a lot of layers of plants in one building, making it a more cost-effective method of growing than traditional farming.

Vertical farming as a sector is in its infancy, but has the potential to change the way we grow our food.

Taking a look at Scotland’s first vertical farm

At Aberdeen Standard Investments, we believe on-the-ground research and first-hand engagement are essential to fully understand a company, sector or investment trend.

To that end, we recently visited Scotland’s first vertical farm, developed by Intelligent Growth Solutions (IGS), an innovative agritech company established in 2013.

In 2018, IGS built its first vertical farming demonstration facility, which has allowed the team to develop and patent its breakthrough Internet-of-Things-enabled Power & Communications Platform. This platform uses Artificial Intelligence to identify optimal growth conditions for plants.

The vertical farm consists of four 40.8 square metre (sq. m) towers in an industrial block, utilising approximately 250 sq. m of land space. This is also then supported by an additional service area. Each tower can accommodate approximately 50 trays of plants. This setup is similar to a widely available automated warehousing system, and is easy to build and replace.

IGS has developed a system where conditions on each tray are managed individually. Each plant growth is supported by an optimisation algorithm and everything is controlled from a mobile application. It specifies the exact needs in terms of water, lighting, temperature and humidity by the minute, for the full growth cycle of the plant.

This state-of-the-art facility is based at the James Hutton Institute, a world leader in plant, crop, soil, land use and environmental research. Being based at the institute gives IGS access to expertise in plant science. It also means IGS can collaborate on projects that will facilitate the development of technology and demonstrate the scalability of VF – with the opportunity to deliver on a global scale.

What benefits does vertical farming deliver?

VF delivers significant benefits over traditional farming, as detailed below.

  • Land use. VF uses significantly less land than traditional farming. At IGS’s vertical farm, each tower only requires 12% of the land compared to growing the same crops outdoors. There is also an opportunity to repurpose unused buildings for urban growth ( for example, London underground plant growth).
  • Water. VF requires significantly less water than traditional farming as there is less evaporation and water can be easily recycled. The IGS farm has a closed loop irrigation system, which means rainwater is harvested, used and recycled, saving up to 95% on water usage.
  • Climate resilience. VF helps increase the climate resilience of local food production. This is because crops can be grown all year, irrespective of the increasing frequency of extreme weather events, droughts and floods.
  • Year-round growth. Given growth is possible 365 days a year, the number of annual growing cycles in vertical farming is much higher than in outdoor farming. This is also hugely beneficial for breeding more resistant plants quicker.
  • Energy usage. A vertical farm combined with renewable energy would work extremely well, as it does not require a continuous baseload of energy and can cope with intermittency. The tower can be used to store energy and take it from the grid when needed.

Energy can also be a concern, as keeping the vertical farm running requires energy that outdoor growth doesn’t. At IGS, each tray requires around 1 kilowatt for cooling and lighting. Maximising energy efficiency is critical. IGS’s vertical farm only delivers the lighting the plants need at a certain time and is, therefore, more energy efficient and cost effective than other indoor plant growth, e.g. a glasshouse.

On top of the energy requirements, there are additional challenges to VF. Only a relatively small number of crops are suitable for VF, but these ranks will expand as technology evolves. Start-up and ongoing costs can be high. There is also the perception that VF is ‘unnatural’. Again, we believe these will become less of an issue as the sector matures, policy support strengthens and the benefits become more apparent.

What is the status and expected growth of vertical farming today?

VF as a sector is in its infancy, but has the potential to change the way we grow our food. This is particularly relevant for areas with rapid population growth, strong urbanisation trends, land constraints and high vulnerability to climate change and water stress. IGS estimates the global market in VF will increase 24% per annum over the next three years.

Its wider adoption would be most effective in drought-stricken regions, such as some areas in the Middle East and Africa. It is also suited to small and highly urbanised countries such as Israel, Singapore, Japan, Taiwan and the Netherlands. Further, VF is attractive in countries that suffer from heavy pollution and soil depletion but where demand for high-quality food is high. This would include parts of China.

To realise VF’s potential will require government policy support, including a clear strategy on how it fits into national polices. Stakeholder collaboration and education will be important. Meanwhile, there will be a need and opportunity for private and public investment. Given the levels of capital available, such investments could dramatically improve optimisation, increase scale and bring down costs.

What does this mean for investors?

For investors, knowledge about VF developments, the technology behind it and the sustainability benefits it delivers is relevant in a number of ways. There are likely to be winners and losers in the VF revolution. It is therefore important to understand the risks and opportunities as the sector develops. These insights can then be integrated in investment decisions and used to inform engagements.

Engaging with companies that are involved or are showing an interest in VF could afford valuable insights into the growth potential of the sector. It also provides an indication of opportunity for those publicly listed companies positively exposed to more sustainable farming.
There is potential for direct investment, too. For example, there are opportunities to fund innovative private companies that develop the technology and algorithms to optimise plant growth. Investors can also buy vertical farm buildings as real assets.

Final thoughts…

The way we grow food today is unsustainable in terms of land, water and energy. However, vertical farming represents an innovative way to produce better food, in a more efficient and environmentally sound way. With the right investment and engagement, VF could eventually become the food production method of choice for future generations.