Modular Vertical Farming in the UK
Financial Analysis
This page looks at whether modular vertical farms commercially viable in the UK.
Economic evaluation methodology and results
​
Introduction
The economic evaluation of the project is sum of three key areas to understand the overall financial performance and viability of Vertical farming (VF) within the UK. Within each stage of the Economic evaluation, assumptions were stated due to uncertainties in data and for simplification purposes.
Firstly, an investigation into the potential financial benefits of energy procurement through off-peak and 100% renewable sources tariffs was undertaken. This also allowed the percentage of energy that was truly renewably generated within the model to be determined.
Secondly, a cost benefit analysis on the installation, operation, and maintenance of PV panels to determine the suitability for the Vertical Farm configuration was conducted to quantify the payback period and overall savings that can be incurred through the 25-year life cycle of the PVs.
Lastly, there was an inspection into suitable crops for that would be suitable to grow and make a profit in a vertical farm. The ideal criteria for a suitable crop would be that it is of high value, produces a high yield per m2 and has a short crop cycle that will produce high annual produce turnover.
The combination of these three areas will be used to determine the overall start-up and operation costs, the savings provided by PVs, the minimum price at which produce can be sold and if the project is viable withing the UK.
​
Methodology
Investigation into 100% renewable and off-peak energy procurement
Investigating the rates available for businesses using either 100% renewable and off-peak tariffs from UK electricity providers can give an idea into the final operations costs and viability in the project. The tariffs were based off limited data and quotes from the providers that can be seen in the excel download. The daily usage of electricity is to be assumed at 16hrs per day as the lighting is so energy intensive.
It has been assumed that the off-peak tariffs use a mix of renewable and nonrenewable sources, thus giving 37.5% of the energy guaranteed to be renewable. Similarly, it has been assumed that the off-peak rate is constant through the 10hours of energy provided.
Figure 1: Energy tariff rates
PV Panel Cost-Benefit Analysis
Cost-Benefit analysis provides insight into the life cycle savings/costs and the suitability of PVs for our needs.
It was assumed that the lifecycle was 25 years, maintenance of the PV configuration was £130 per year and a discount factor of 5% was applied. These assumptions alongside the data from PVSyst were used to determine the cost-benefit.
Crop selection process
When trying to maximise profits and ultimately make the operations of a VF viable, an investigation into potential crops is essential.
The data available from liberty, cropbox and literature was used to base the investigation. Ideally, a high value crop with a high yield per crop area is desirable, but also to have a short growing cycle to maintain a large annual production turnover.
This is used later to find the minimum price at which produce must be sold to match the operational energy cost.
Overall financial for start-up and operational costs
To understand the split between start-up and operational costs for each scenario, the cost-benefit analysis results and procurement information were used. This could help pinpoint the main factors of each scenario cost. The results were normalised per crop area available as a means of comparing the different solutions for each vertical configuration and the difference between traditional farming.
​
Overall financial for crop production and cost viability
Using the energy cost for both models, it can be determined that the amount that can be produced, the minimum profitable cost of each crop and comparing it to the market price to determine the viability.
Results
Investigation into 100% renewable and off-peak energy procurement
It was concluded that procuring energy from 100% renewable tariffs would cost in the range of £10.2-12.3k for liberty and £15.1-18k for cropbox, depending on the provider and insulation configuration. By utilizing off-peak tariffs for 10hrs during the day, the total energy price can be reduced to £7.8-8.7k for liberty and £11.6-12.7k for cropbox
​
PV Panel Cost-Benefit Analysis
It was calculated that annual savings of £1,780 with the discount factor and that the PV would be paid off by the middle of year 4.
The total costs and savings give a cost-benefit ratio of 2.94 which indicates that the PVs are suitable for installation to assist in the energy off-setting process for vertical farms and do not overbear the project with additional maintenance and start-up costs.
Figure 2: Costs and savings over PV life cycle
Crop selection process
Microgreens and spinach were deemed most suitable due to their short growth cycle, high annual yield, and profitable crop per m2 of land available for growing.
Figure 3: Crop characteristics and returns
Overall financial for start-up and operational costs
​
Figure 4: Overall costs for selected scenarios
Our normalized results show expectedly that the start-up costs of both vertical farms are the dominant in equipment, installation, and energy costs per m2 of crop area. It can also be seen that as the crop density per container increases from liberty to crop box, the costs per crop area decrease and therefore become more cost-efficient.
Whereas maintenance/labour costs are the dominating cost per m2 for a small-scale TF
Overall financial for crop production and cost viability
The calculated values for Microgreens and Spinach are well below those of the market selling price at roughly £3-2 for microgreens and £3.50-4.5- for spinach.
However, due to lack of data on distribution, packaging and other postproduction cost, the break-even price would most likely be higher and this could become higher than the market average.
