Without Mitigation Strategies, Rising Energy Costs Spell Disaster for Indoor Farms

Title: Without Mitigation Strategies, Rising Energy Costs Spell Disaster for Indoor Farms

Over the past year, energy prices have been volatile, and they are expected to rise heading into the new year. The conflict between Russia and Ukraine has caused the West to impose tariffs on Russian crude oil, creating artificial scarcity and higher prices on all goods. Indoor farms have experienced a sharp increase in the expenses to run their enterprises; fertilizers, heating, lighting, and other farm inputs are much more expensive, particularly in Europe. As the conflict continues, energy demands increase this upcoming winter, and European climate-friendly regulations create more energy scarcity, a crisis looms for both indoor farms and consumers who are experiencing acute food inflation from multiple sources.

Indoor Farms Dependent on Low-Cost Fossil Fuels

Over the last twenty years, the indoor farming industry has grown exponentially at the cost of carbon emissions due to their dependence on high energy inputs to heat, cool, and provide external light sources. Increasing energy costs are pushing many indoor farms to close until energy costs return to lower numbers and in some cases, to shut down permanently. In the Netherlands, the industry group Glastuinbouw says up to 40% of its 3,000 members are in financial distress; Nordic Greens Trelleborg, a top Swedish tomato producer, has decided to halt winter production; between January and spring 2023, Royal FloraHolland, the world’s largest flower market in Alsmeer, estimates Dutch production will drop by 40%. Heating and lighting comprise 70% of the cost to produce the majority of greenhouse crops and their costs have more than doubled since last year. For some growers, selling their energy contracts that were negotiated prior to the price hike is more profitable than growing crops. Although we can expect Spain and Morocco to increase their production during winter because of Northern Europe’s decrease, overall production will drop and food inflation will likely rise even further than the 11% it’s already risen in the past year, exacerbating the cost-of-living.

Rising Energy Costs

Rising energy costs may appear as a temporary trend, but several macro-economic trends indicate higher energy prices throughout 2023. With no clear end to the conflict in Ukraine, Russian oil will not reenter the Western market in high volume and some fear further cutbacks. In China, demand for fossil fuels could rise if China lifts the severe Covid restrictions that plunged its GDP to 70% of its 2019 level. European climate policy and infrastructure issues have decreased the availability of nuclear energy and fossil fuels exacerbating the energy shortage in Europe. The United States has released oil from reserves to dampen oil prices but will not have the capability to do so continuously. And of course, winter will increase demand for oil due to increased heating needs. If indoor farms are not able to reduce their reliance on fossil fuels, the industry may not be able to survive high energy costs.

What Can Farms Do?

Indoor farms must transition to lower energy requirements, commit to renewable energy sources, and advocate together for energy policy that will keep the industry alive. To mitigate energy costs and carbon emissions, indoor farms must understand their distribution of energy expenditures. CarbonBook can help indoor farms plan for a future with high energy costs by establishing their baseline and benchmarking against their peers to identify opportunities for improvement. The web-based CarbonBook app is transforming sustainability in indoor agriculture by employing rigorous, LCA methodologies to create actionable data insights for indoor farms.