How to Keep Indoor Agriculture Businesses Competitive

Two of the biggest challenges the indoor farming industry faces today are energy use and successful business models. At the intersection of these two areas is technology. Generally, the more advanced the equipment, the less energy the grow operation requires, leading to more efficient yields and quality production. This is especially true in the case of vertical farming, where the method of vertically stacking production requires the use of more efficient lighting with LEDs.

Unlike the lighting scenario, where replacing traditional high intensity discharge lights with LED fixtures reduces the energy demands of a grow system, urban farming isn’t replacing inefficient energy uses of systems, but rather is adding to them. Providing the rational justification for urban farming has become a real challenge to proponents of the market, especially in bigger cities where both the cost of utilities and rent prices are on the rise. Thus, ensuring a successful business model is crucial amidst the growing number of energy-related obstacles startups must face when entering this market.

What Exactly Is CHP?

Combined heat and power (CHP) systems generate both heat and power onsite. According to a recent white paper by the ACEEE, “CHP is not a single technology but rather an approach to using existing technologies, including those typical of traditional electric generation.” However, the efficiency gains from CHP lie in the existing technologies’ ability to capture and reuse the heat generated from the electricity that is produced. The process of simultaneously producing electrical energy and thermal energy under one system (hence the name “cogeneration”) can be especially advantageous for greenhouse horticulture.

CHP to the Rescue! … Maybe?

CHP is not a novelty concept for growers in Europe, especially in the Netherlands, where Dutch horticulturalists have benefited from the system for over a decade. In addition to electrical power and heat, CHP produces CO, a byproduct that is particularly useful to greenhouse growers. Through a decentralized grid architecture, cultivators in the Netherlands have been able to resell unused electricity at a rate of kilos per hour, enabling quicker returns on investments. Thus, the production of power through cogeneration can make for a solid business case when electricity prices or the power demands of greenhouse operations are high.

However, recent studies cast doubt on whether CHP has really benefited growers today in terms of the costs gleaned from energy savings (although the study did find the carbon footprint linked to the use of cogeneration is better). Part of the criticism stems from the risk of overcapacity, which would make it difficult for growers to obtain grid connection to sell the electricity. The 25 edition of Quantitative Information on Dutch Greenhouse Horticulture found that the price advantage of using gas in a CHP as compared to using gas in a boiler is declining due to the decreasing price of the electricity that is supplied back to the national electricity grid.

The Best Way to Use CHP?

Thus, CHP may be more appropriate for certain applications than for others. Larger greenhouse facilities with natural gas infrastructure and consistent thermal demand seem better suited for cogeneration. However, an analysis of the electricity grid to determine capacity and connectivity would bode well for those considering CHP. For more information on indoor agriculture, look for Guidehouse Insights’ recent report, Energy Efficiency for Indoor Farming.