A “Good” Greenhouse Effect? A Framework for Simulating Commercial Greenhouses in Kentucky

Abstract

As climate change’s effects become more prominent, many industries have needed to make adjustments, especially agriculture. Unpredictable and extreme weather, water shortages, and other resource exhaustion has led to innovations in agriculture to preserve food security for the rapidly growing world. Greenhouses offer a solution to all aspects of the food-water-energy nexus by extending growing seasons, conserving more water, and reducing shipping distances and using efficient lighting. However, a main concern is that they must be large enough to create yields that are competitive with traditional producers, which increases the initial cost of capital. Furthermore, new technologies that are implemented in greenhouses promise future savings by reducing inefficiency but are costlier in the short-run. This creates a barrier to long-term success for these growers in America if they are unable to generate enough profits at the beginning to cover the initial costs. Inspired by AppHarvest, a company based in Kentucky that is building a large-scale commercial greenhouse, this thesis looks at the environmental and economic aspects of these ambitious endeavors. This thesis compiles a literature review of existing integrated greenhouse models, detailing their strengths as well as possible extensions. It provides a framework on how to incorporate uncertainties from climate change and resource pricing to better simulate the financial performance of a greenhouse over its operating period. It also proposes other financial measures to use instead of net present value (NPV) that may be more informative for investors on the viability of a greenhouse.