Controlled environment agriculture (CEA) is an innovative indoor farming method gaining interest and popularity in the United States, including among venture capitalists. CEA encompasses various indoor farming techniques, including greenhouse farming and indoor vertical farming.
What is indoor vertical farming?
Indoor vertical faming is farming on a vertical surface rather than the traditional horizontal agriculture. By using this method, farmers can produce more food within the same amount of land or less. These vertical layers are often integrated within buildings, warehouses, shipping containers, or greenhouses. This method allows for increased food production in limited spaces.
This approach allows for precise control over environmental factors such as temperature, light, and water. By maintaining optimal conditions, CEA enables year-round local production of crops, even in northern climates and urban settings. Notably, well-designed CEA facilities use less water and land compared to traditional agriculture, and can be designed to be fully contained with no run-off of agricultural chemicals, making them more sustainable.
However, the energy-intensive nature of CEA operations, driven by climate control and lighting systems, poses a challenge.. Despite higher yields due to year-round production, the high start-up costs, together with high energy costs, have impeded CEA from a cost-competitive standpoint when compared to outdoor agriculture. Many CEA facilities focus on high-value produce, such as tomatoes, strawberries, and herbs.
To address the energy concerns, there is a growing interest in integrating on-site renewable energy generation, such as solar panels, into CEA projects. This strategy, while promising for sustainability, introduces complexities in permitting and project development that stakeholders, including developers, lenders, and investors, need to carefully consider.
As with any transaction involving real estate, developers, lenders, and investors should scrutinize potential projects, especially for projects with an on-site renewable energy generation component, with an appropriate degree of environmental due diligence, including conducting or relying on a current Phase I Environmental Site Assessment. In addition, other areas of inquiry include evaluating potential impacts on wetlands, endangered species, and cultural resources, as well as ensuring that the construction of the project complies with stormwater runoff requirements, FAA requirements (if the project is located near an airport), and the necessary state and local approval requirements.
As CEA continues to evolve, addressing its energy challenges and integrating sustainable practices will be essential for its widespread adoption and success in reshaping modern agriculture.