GREENBOX Technology III - Financial Feasibility for Crop Production in Urban Settings

Abstract

Highlights We proposed to use GREENBOX technology for urban crop production in warehouse settings. We assessed the profitability of the application of GREENBOX technology using Benefit Cost Analysis (BCA) to evaluate the Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Period (PP). We conducted sensitivity analyses on NPV, IRR, and PP over different scenarios. GREENBOX was found financially feasible for all the hypothetical scenarios in major cities in the USA. Abstract . Food security pressure, especially in urban areas, continues to rise due to surging demand for food resulting from a growing population and declining resources. It has been critical to improve crop production and make food readily available to consumers without traveling long distances in an economically sustainable manner. The novel GREENBOX technology uses Controlled Environment Agriculture (CEA) principles for leafy green crop production in urban structures. A GREENBOX is an individual thermally insulated chamber with an artificial lighting source and a soilless cultivation system (hydroponics) in an environment that is controlled at the grower's discretion. This study performed a financial feasibility study of GREENBOX technology for urban crop production in various scenarios to evaluate the system's profitability from an individual business's perspective and used market prices of the goods and services paid for or received by a project. The representative GREENBOX unit in the base case scenario had dimensions of a standard shipping pallet (1.0 x 1.2 x 0.9 m, or 40 x 48 x 36 in) and included thermally insulated walls, an LED artificial lighting source, a camera for monitoring growth, a Nutrient Film Technique (NFT) hydroponic growth platform, and an environmental monitoring and control system. A warehouse can host numerous GREENBOX units for mass production. We carried out a benefit-cost analysis by assessing the Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Period (PP). These parameters were evaluated for a base case scenario from data collected or estimated for a representative GREENBOX unit. We also applied the base case scenario to investigate the financial performance of the GREENBOX setup in selected urban areas in the United States; New York City (New York), Miami (Florida), Los Angeles (California), Dallas (Texas), Atlanta (Georgia), Chicago (Illinois), Boston (Massachusetts), and Philadelphia (Pennsylvania). We then carried out a sensitivity analysis on NPV, IRR, and PP by keeping all the parameters in the base case scenario invariant except for one at a time. We obtained a summary equation to understand the variation of the financial parameters with changing lettuce sale price, electricity cost, rental cost, labor cost, and the number of GREENBOX units. A GREENBOX unit would require an initial investment of $398 to assemble and an annual outflow of $157 to cover operating expenses. GREENBOX cultivation was financially viable in the base case scenario and in all the cities studied, with varying degrees of financial performance. The sensitivity analysis revealed that GREENBOX cultivation was financially viable in all scenarios except when skilled labor costs were beyond $19/hr, and there were fewer than 300 GREENBOX units. A statistically significant regression equation was derived in which rising rental costs, labor costs, and electricity prices negatively impacted the NPV, while the rising lettuce sales price and the number of GREENBOX units positively impacted the NPV. GREENBOX farming may serve as a local source of fresh crops for urban customers, with various benefits including improved food security, greater freshness and nutrition of food, the potential to contribute to the local economy by the creation of jobs and revenues from sales, and educational opportunities through extension programs on food nutrition and production. Keywords: Agricultural business, Environmental control, GREENBOX, Lettuce, Urban agriculture.