The Economics of Urban Farming
A few weeks ago, my girlfriend and I went on an urban farm tour put on by Square Roots, an energetic participant in the urban farming movement. We were curious urban farming and wanted to learn more. The promise of urban farming is appealing: food production distributed throughout dense urban centers, giving city dwellers (half the world population) access to fresh and high-quality food grown under optimal conditions, while simultaneously eliminating the carbon emissions necessitated by transporting food across long distances from rural production centers, as well as eliminating loss due to pests and disease, and reducing water usage via efficient reclamation.
These benefits are real. However, there is a shadow side: much of this flexibility comes from growing food indoors: in specially-constructed farming facilities, or as Square Roots proposes, in standard shipping containers. Growing food indoors necessitates a new input, which traditional agriculture gets for free: light.
The importance of this input should be clearly stated: inasmuch as earth’s energy comes from the sun, the majority of our sources of energy involve harnessing this solar energy and making it available for later consumption. Plants capture and use this energy in photosynthesis. The herbivores and omnivores which consume the plants are using that same solar energy. Our fossil fuels consist of this same energy, concentrated over the course of thousands of years. Solar panels capture this same energy in more sophisticated ways. As far as our planet is concerned, the Sun is primary source input from which new energy enters our system.
A new form of agriculture, then, in which this solar power must be provided from within the system, would seem to have a pathological economics. To burn coal to power the lights which grow the plants is to leak energy out of a porous loop: burning coal to grow the plants to feed the humans to mine the coal. From where does energy enter this system, to allow it to grow? Light-powered agriculture is fine for speciality crops, but would seem questionable as an input into our core sustenance loop.
One could argue that indoor, urban agriculture brings many efficiencies which offset this new cost. Controlled environments reduce lost due to inclement weather and pests, effectively multiplying the amount of solar energy ultimately brought to market. Better water reclamation means that food is grown with a fraction of the water used on traditional open farms. This saves energy costs previously needed to aquire and clean water. In addition, growing food within a mile of where it is ultimately consumed brings transporation costs to nearly zero, eliminating the need for further energy inputs for transportation. Finally, as the food is of a higher quality, one could argue that such food has benefits on the humans which ultimately consume it, leading to myriad hard-to-measure personal and social benefits. The argument concludes that despite needing an essential new input, the process has so many efficiencies that it ultimately becomes a more efficient system for converting energy and material to food.
How does this argument hold up when applied to the case of Square Roots? At the farm tour, I asked Tobias Peggs, the co-founder and CEO, the question concerning the new light inputs, and another attendee asked about land costs. His response was that a shipping container farm unit cost about $1,200 per month to run: $600 to rent the parking space in Brooklyn, and another $600 to power the lights. These lights consume 100 kilowatt-hours (kWh) of electricity per day: to put that in perspective, a modern fridge uses 350 kWh per year: these shipping containers require the energy equivalent of 100 modern fridges. Water costs are negligible.
Now we ask: how much food does this grow? This containers are not huge. By maximizing output and minimizing loss, these containers produce about 50lb of vegetables per week, 200 per month: an impressive yield for the space. Dividing by cost, we get $1200 / 200 = $6 per pound of food (overwhelmingly, leafy greens). This is three 3x the cost of a pound of organic Fuji apples at a midtown-Manhattan Whole Foods ($1.99), and 1.7x the cost of organic Baby kale ($3.49), after the Bezos price drop.
Not great, but not terrible, especially when you consider that this food is of higher quality even than Whole Food’s best. Yet even with all these efficiencies, it appears as though the new energy cost dominates the equation, making it difficult for these modern farmers to compete with their more traditional counterparts. The sitution becomes more chalenging when you consider a wider range of produce. These containers are usually growing herbs and leafy greens: plants with low biomass. There is interest in growing heaver foods like strawberries and tomatoes, but such foods would (unsurprisingly) require even more energy, the urban farmer’s disadvantage.
One would naturally ask about solar panels. Could we not line the tops of these shipping containers with solar panels, and essentially continue to grow these plants using energy straight from the sun? When asked this, Peggs replied that current solar technology would allow for rooftop panels to meet about 25% of the container farm’s energy needs. Assuming free installation and maintenance, installing rooftop panels would reduce energy cost by $150/mo, bringing cost-per-pound of food down to $5.25, still a full 50% more expensive than the $3.49 Whole Foods alternative.
So what is Square Roots doing?
- Why is Square Roots iterating on the business model of “entrepreneural urban farmer?”
- Why is Square Roots building out a network of these farmers, each one hustling to sell their greens to local restaurants and specialty groceries, under Square Roots’ imprint?
- Why is Square Roots working to raise awareness of these alternative greens, focusing first on chefs and restaurants, tastemakers willing to pay a premium provide an extraordinary experience?
They are, as Wayne Gretzky’s father famously taught, “skat[ing] to where the puck is going.” With Kimball Musk, brother of Elon, on the board, it seems fairly clear that Square Roots is banking on a green energy revolution. While today’s solar panels would power only 25% of the needs of a container farm, today’s solar panels are only around 20% efficient in capturing the available solar energy. If solar panels were developed which were even 80% efficient (no mean feat), then these container farms would be energy-independent, recreating the more fundamental argricultural energy relationship. That growing (as opposed to leaking) energy loop, combined with the many efficiencies of container farming, would lead to container farms becoming a revolutionary force in food production.
Today solar technology is not there. But in five or ten or twenty years, they perhaps might be. And when that day comes, Square Roots intends to be ready: with a vast network, a scalable business model, and a powerful brand. Is this a gamble? Perhaps. But remember that risk is in the mind of the perceiver. What appears risky to one may not appear risky to another, as they see things differently.