Biden’s plans to spend $3-5 trillion in a recovery package to rebuild the economy sounds very promising. In this series, we’re exploring ideas for him to include in the package, focusing on ideas that no one is really talking about already. Today, we dive into why Biden should invest in building a vertical farming industry (and more broadly, a sustainable agriculture industry) in America.
Why Vertical Farms?
The world’s population is expected to reach about 9 billion people by 2050, but our methods for feeding people are not scaling at the same rate. Arable land is decreasing due to mass factory farming and climate change. To make matters worse, water shortages are increasing as are farm labor shortages.
At the same time, tens of millions of Americans live in food deserts with little access to high-quality, nutritious food leading to all kinds of health issues. Plus, who doesn’t want to eat delicious food?
Then there’s climate change. Modern day agriculture accounts for about 10% of total greenhouse gas emissions in the US, but this doesn’t really capture the full effect of agriculture on climate change today. Developing land to make space for agriculture destroys critical ecosystems. This not only make millions of species go extinct, but also removes some of the most effective carbon sinks on our planet, like the Amazon rainforest. This ends up creating a doom loop where agriculture exacerbates climate change, which creates more droughts and water shortages, which reduces arable land and resources needed for agriculture. It can’t go on like this forever.
So while it’s unlikely there will be one silver bullet solving all these problems, vertical farms can be a big piece of the solution. Vertical farms are, essentially, giant indoor farms that grow plants on shelves in fully airtight warehouses where every variable is tightly controlled. They look like this:
The result is food that can be grown year-round in a fraction of the space of an open field farm, resulting in over 100 times the productivity of an open field farm. Vertical farms grow food hydroponically with artificial light, so they don’t need sun or soil. The crops are fresher since vertical farms can be located closer to the point of sale. They are fully indoors, so they aren’t affected by climate events and don’t need pesticides. Vertical farms decentralize our crop production, making it less likely for us to have large-scale outbreaks of food-borne illnesses (the 2018 E. coli outbreak in romaine lettuce was so big because a few farms in California and Arizona supply more than 90% of lettuce in US and Canada!). They can produce food with higher nutritional concentration by manipulating the growing environment. And they can be located anywhere--so you can grow fresh local produce in every food desert, from urban Detroit to rural Alaska.
On climate change, there’s still some debate on whether vertical farms are sustainable. On one hand, vertical farms can be fully electrified--meaning they can operate on electricity alone. They can also be placed close to the point of sale for food, reducing the number of miles food must travel to be sold. They also require 95-99% less water than traditional farming. But critics often point to the high energy use of vertical farms and the greenhouse gases created by building vertical farms as reasons they are not sustainable--and they’re right! If all we did was ramp up vertical farming without making power generation in America 100% clean and creating a clean supply chain for steel, plastics and other industrial materials, vertical farms would not help us tackle climate change. But if we don’t make power generation clean or build clean alternatives to basic parts of our supply chain, we’re dead in the water on climate change anyway. There is no path to a sustainable world without clean power generation and clean industry. So vertical farms are like electric cars--they are the sustainable option for a world where we solve the supply chain and power generation problems, but don’t really help us (and maybe even make things worse) if we don’t tackle these broader problems. Fortunately for us, it is entirely possible to have completely clean power generation and clean industry, and there is already a lot of focus on scaling these solutions. On the other hand, the resource constraints for continued growth of traditional farming--arable land and water--are harder to solve.
Why invest in this now?
The earliest concepts for vertical farms using artificial light were developed in Japan in the mid-1970s, with the earliest vertical farms getting built in the 1980s in both Japan and the US. And while a lot of early research in vertical farming was done in Japan, a lot of the key technologies for vertical farming were created by the US. During World War 2, we invented hydroponic farming in order to provide fresh vegetables to US troops stationed in the Pacific theatre. NASA and NASA-funded groups did much of the early research in the 1980s to make efficient LED lights possible.
After years of largely R&D-style development, vertical farming seems to finally be at a tipping point due to sustained state-led investment in Asian countries and a few key technologies that have advanced, especially in LED lighting. In Japan, government agencies have invested heavily in both R&D as well as directly in industry, collaborating with universities to build large research-oriented vertical farms while also providing up to 50% in subsidies for private vertical farming companies. There was also state investment to build up vertical farms in Fukushima in the aftermath of the Tsunami to restore the agricultural industries there. In Taiwan, the state has invested more in R&D, but government-backed non-profits consult with industry to help vertical farming companies get their products to market and learn from the latest research. In Korea, state-led investment in lighting technologies have created huge advances for vertical farms both in energy efficiency and productivity. The governments of China, Taiwan and Thailand have similarly begun investing more in vertical farming over the last decade. As a result, all of these countries have had several profitable vertical farming businesses emerge in the last several years.
In the US, on the other hand, there has been almost no state-led investment in vertical farming since our original contributions during World War 2 and the 1980s. But it’s not too late to start! Because of advances in vertical farming technology and investment from private investors, private companies in the US, like AeroFarms and Plenty, are getting a lot of attention, but vertical farming as an industry is still struggling to take root in America. Only about a quarter of vertical farms in the US are profitable, and access to capital is reported as the number one cause for problems.
Vertical farming is still an incredibly new industry with many problems to solve, especially compared to traditional agriculture which has thousands of years of knowledge backing it. Vertical farms today are very limited in what they can grow--most grow only leafy vegetables and herbs. These crops have had the most history of being grown in vertical farms, so they are known to work. But with additional research, we should be able to expand growing other crops in vertical farms like fruits, root vegetables, and even staple crops like corn or rice. One big advantage vertical farms have is their crops are harvested 15-20 times a year instead of just twice a year, so if a lot of investment is put into companies and research institutions experimenting on different types of crops in parallel, we can learn a lot in a very short amount of time.
Vertical farms are also still quite costly to start up and operate. But this is exactly why they are a good target for state-led investment now. Costs have already been trending down as technology and efficiencies have increased. Plenty, an American vertical farming company, is already boasting 350x productivity over open field farms by using machine learning to reduce waste in its production. So if we can further reduce startup costs and production costs through state-led investment, we can develop the industry to a point where it is fully competitive.
How would Biden invest in vertical farms?
There’s a lot of potential for vertical farming, and the rest of the world clearly sees the opportunity in it, but it’s unlikely to be the only solution to all of our future agricultural needs and should be seen as a new technology we can use to scale up to new demand for food, rather than a technology that can wholesale replace traditional agriculture. It’s much more likely that we’ll need to develop a holistic, sustainable agricultural system for the future that will include vertical farms, regenerative farming, lab-grown meats, and other technologies that have not even been invented yet. We need a sustained, long term approach to revamping our agricultural sector, so this won’t be solved by simply putting in a few billions dollars into Biden’s recovery bill.
Instead, Biden should focus on using this recovery bill to set up and fund a couple key institutions that can provide the kind of sustained support to a new industry like vertical farming. Joe Manchin is already interested in setting up one institution to do this—an infrastructure bank. But we believe he should go beyond that to set up a bank that can invest in industry. We should be building more than roads and bridges in West Virginia and America as a whole—we should also be building clean steel plants, vertical farms, and electric vehicles to create real, long-term wealth. Biden can do all that with a few tweaks to the Federal Financing Bank (FFB) housed in the Treasury combined with a new strategic planning body. To read more about how exactly these new institutions would work, read the New Consensus whitepaper on Investing in America with the Treasury.
If Biden uses the new recovery act to create a National Reconstruction and Development Council (NRDC) and beefed up Federal Financing Bank, investing in vertical farming would be as simple as the FFB creating a special investment vehicle for sustainable agriculture. This SPV would raise private capital in addition to using public capital and would invest in companies starting sustainable agriculture companies, like vertical farms. Sustainable agriculture companies could apply for financing from this SPV, either in the form of loans or even equity stakes. The SPV would also do outreach directly to existing farmers and vertical farming practitioners at research institutions to encourage them to accept this cheap financing to upgrade their farms to be sustainable and more efficient, or start new sustainable agriculture businesses. And because this money would be going towards productivity, there would be no fear of inflation even if the public money were debt-financed.
At the same time, we would recommend some funds go to research institutions and universities doing R&D on vertical farming so we can further experiment with diversifying the crops vertical farms are producing as well as create new technologies to make them cheaper and more efficient. The Endless Frontiers Act, introduced by Rep. Khanna, Rep. Gallagher, Sen. Schumer and Sen. Young, has already passed the House and already allocates new money for R&D that could go towards this effort.
Vertical farming is not going to be a silver bullet to solving our sustainable agricultural needs, but it’s the kind of industry that we hope to see America investing in. And more broadly, we hope the Biden administration uses his recovery plan to not just invest in the social safety net and infrastructure, but also in industry. And to do this, he needs to create investment institutions focused on the long term, because building a next generation American economy that creates wealth and prosperity for all can’t be done in just one bill. It will take a multi-year, sustained effort to build the industries of tomorrow, and there’s no better time to start than now.