Plants that grow under artificial light in vertical farms – does this make any sense? An OSRAM study explores the societal value of LED lighting in vertical farming, using New York as a model.

The world’s population, particularly in its metropolitan areas, is skyrocketing. For this reason, researchers around the world are investigating urban food concepts of the future. One promising solution is vertical farms in cities: Factory halls where vegetables and lettuce are grown in stacked layers under artificial light. But is this really a good idea from a societal perspective? An OSRAM study conducted with the consulting firm KPMG has delved into the social value of LED lighting in vertical farming by examining the lettuce consumption of New York City: What if all of New York’s annual lettuce consumption was produced in local vertical farms?

Money for value

Vertical farming has a number of apparent advantages over open-field farming: It can grow crops throughout the year, reduces land use and offers protection from weather-related issues. Because the environment is controlled, vertical farms can reduce the amount of water and fertilizer used. Pesticides can largely be abandoned as well. Furthermore, the crops are grown in closer proximity to end-consumers: Transport ways are shortened, products are fresher and less food is wasted as a result. On the other hand, vertical farms consume electricity, and they have less need for direct labor than conventional farming conducted under the open skies.

To gain a true understanding of the technology, a holistic value analysis was needed, a study that would examine the broad range of impacts that vertical farming has on society – both in economic and environmental terms. These effects differ based on the local conditions involved. For this reason, OSRAM developed a special application study for New York and examined four technology scenarios regarding lettuce production: conventional open field farming with natural light as the base scenario, greenhouses with traditional high pressure sodium lamps (HPS) or with LED lamps, and vertical farms with smart LED lighting.

What price the world?

The calculation of the environmental and socio-economic impacts of the four scenarios was done together with KPMG using established monetization approaches. “Today, companies are expected to make a positive net contribution to society,” says Arjan de Draaijer, Managing Partner at KPMG. “To determine this contribution, we apply a range of instruments in finance modeling in combination with data sources such as economic impact analysis or environmental and health economics.” 

Impact: positive

The result is clear: Compared with open-field farming, vertical smart LED farms make the biggest positive contribution to society: A total of €322 million could be saved by society annually if all citizens of New York City consumed lettuce produced in LED vertical farms. This is mainly driven by the societal costs related to reduced water use. “A vertical farm reduces the amount of water used to grow lettuce by up to 98 percent,” says Jochen Berner, head of the sustainability team at OSRAM and the initiator of the study. “In the United States, the societal costs are high because conventional lettuce farming is mainly located in water-scarce areas like California and Arizona.”


Added to this are considerable CO2 reductions and nearly 25 percent less food waste. One reason for these reductions is short transport times. Another is the ability of vertical farms to control plant growth. This, in turn, enables supply to be more closely aligned with demand. “This is a tremendous lever when you consider that in farming production around 40 percent of food rots and is thrown out,” Berner says.

On the other hand, social costs are connected to vertical farming as well: This form of farming is more efficient than lettuce growing in open-field farming. It takes people with higher qualifications, but fewer of these individuals to grow the same amount of lettuce. The study estimated that reduced direct employment would have an impact of up to €44.6 million in societal costs.

Still, when adding up all of the pros and cons, the bottom line is definitely positive. And it could be even better: Further improvements would be achieved if green power were used as the basis of vertical farms’ energy supplies instead of the electricity mix used today. Production costs could be lowered by shifting lighting phases to times where energy prices are lowest, that is to say at night time. Experts are already thinking about the possibility of using excess green power to supply vertical farms.

The application study is based specifically on New York and cannot be applied necessarily to other regions. But findings like the one about water consumption clear the way for OSRAM to explore strategic partnerships in areas where water is scarce. “The study and the methodology used in it help us in two ways: They make it possible to demonstrate the impact of alternative options for action and to make them transparent,” Jochen Berner says. “The evaluated information can then help people make better decisions in such areas as investments.” And it highlights the added value that OSRAM’s technologies have for society. “Our company’s mission is to unlock the potentials of light to improve people’s lives. We want to be measured by this goal in the truest sense of the word.”