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Greenhouse Investment: Calculating The Return On Investment Payback Time For Yield-Enhancing Technologies

Highlights:

  • Calculate your greenhouse’s productivity.
  • Estimate your crop’s yield enhancement.
  • Compare the payback time to technology lifetime.
  • Examples for tomatoes and cannabis.
Greenhouse Film Technology

This article will walk you through a simple but essential calculation of the return on investment (ROI) payback time for UbiGro. Moreover, the calculation applies to any yield-enhancing technology used in the greenhouse.

Greenhouse Productivity

The goal here is to calculate your greenhouse’s productivity, in units of dollars per area per year, for a given crop. This gives us a baseline productivity upon which a yield improvement is added. Just take the total revenue for an average year, and divide by the greenhouse footprint area.

Lettuce Crop

Example (1)

Bob’s greenhouse grows beefsteak tomatoes in New Mexico. Bob has 1487 m2 (16,000 ft2) of greenhouse footprint across several greenhouses. Looking at his historical production, Bob knows that, on average, over the past five years, these greenhouses produce about 100,000 lbs of tomatoes per year, and his average wholesale price is $2/lb, so his average yearly revenue is $200,000/year. Per unit area, this productivity is $134.50/m2/year ($12.50/ft2/year).

Example (2)

Kim’s greenhouse grows recreational cannabis in California. Kim has several greenhouses, each 201 m2 (2,160 ft2) in footprint. Looking at her historical light deprivation and full season production, Kim knows that on average over the past five years, each greenhouse produces about 186 lbs of dry/trimmed cannabis per year and 47 lbs of trim per year, when combining the two seasonal harvests. With her average wholesale price of $800/lb for dry/trimmed cannabis and $100/lb for trim, her average yearly revenue is $153,500/year from each greenhouse. Per unit area, this productivity is $765/m2/year ($71/ft2/year).

Yield Benefit

Here’s where we have to estimate the performance of the yield enhancement technology. We can leave the performance as a variable in order to assess the payback time for different results. UbiGro has shown yield enhancement performance at various sites from +5% to +28%. The actual performance at a given greenhouse can’t be known before a trial, so for ROI calculation we can look at a range of outcomes.

Example (1)

Bob has learned that for tomatoes, UbiGro has shown yield enhancements from +6% to +20%. He has decided to look at low- (6%), mid- (13%) and high-performance (20%) outcomes to make his ROI decision.

Example (2)

Kim has learned that for cannabis, UbiGro has shown yield enhancements from +5% to +22%. She has decided to look at low- (5%), mid- (13.5%) and high-performance (22%) outcomes to make her ROI decision.

Installation Cost

The last piece of the puzzle is to determine the installation and maintenance cost of the yield-enhancing technology on a per-area basis. UbiGro’s bulk installation cost is $32/m2 ($3/ft2) for large area installations, with zero maintenance cost. If there were a maintenance cost ($/area/year) for a given technology, the proper calculation would be to subtract this cost from the farm revenue.

Example (1)

Now Bob can put together all of this data and come up with a payback time for the three performance scenarios. For high-performance:

Example (2)

Kim can come up with a payback time for the three performance scenarios. For high-performance:

Compare The Payback Time To Technology Lifetime

The final decision point comes when comparing the expected payback time to the actual lifetime of the technology. For UbiGro, the lifetime is 4-6 years in the greenhouse.

Example (1)

Bob can see that he has a range of expected outcomes. The best case scenario (+20%) is a very fast 1.2 year payback time on UbiGro that lasts over four years in the greenhouse, realizing Bob excess profitability for at least 2.8 years of the film’s lifetime. If Bob’s tomatoes experience the lowest expected yield enhancement, then the UbiGro film would still pay for itself in 4 years.

Example (2)

Kim’s range of expected outcomes are all exceptional given the high value of the cannabis crop. The best case scenario (+22%) is a very fast 0.2 year payback time, essentially one harvest, on UbiGro that lasts over four years in the greenhouse, realizing Kim excess profitability for the vast majority of the film’s lifetime. If Kim’s cannabis harvests experience the lowest expected yield enhancement, then the UbiGro film would still pay for itself in less than one year.

Putting It All Together

Based on UbiGro pricing and market research we’ve conducted with various greenhouses, we can use this model to predict payback times for various yield benefit outcomes, and inform the grower’s decision on greenhouse investment. The table below summarizes these findings.

Dr. Damon Hebert

Dr. Damon Hebert

Dr. Damon Hebert serves as Director of Agriculture Research for UbiQD, Inc., with a background in solar materials and controlled environment cannabis cultivation. He is an advocate for the use of advanced materials to further the industry’s push towards sustainable farming practices. He can be reached at [email protected]

Dr. Damon Hebert

Dr. Damon Hebert

Dr. Damon Hebert serves as Director of Agriculture Research for UbiQD, Inc., with a background in solar materials and controlled environment cannabis cultivation. He is an advocate for the use of advanced materials to further the industry’s push towards sustainable farming practices. He can be reached at [email protected]

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Hunter McDaniel CEO & Founder UbiGro

Hunter McDaniel, PhD

Founder & CEO

 Hunter earned a Ph.D. in Materials Science and Engineering at the University of Illinois at Urbana-Champaign, before joining Los Alamos National Laboratory in the Chemistry Division. Ultimately the value proposition of UbiGro is about boosting crop yields and quality without the cost or energy impact of lighting. Hunter has more than fifty publications and patents, and more than 2000 total citations, h-index: 20. Hunter fundamentally believes that novel materials underpin every significant technology advancement, and he is focused on leveraging new materials to have a lasting and sustainable impact.

Damon Hebert, PhD

Director of Agriculture

Damon brings a wide range of experience in agriculture, materials science, spectroscopy, and small business. During his time in Prof. Angus Rockett’s research group at The University of Illinois at Urbana-Champaign (UIUC), Hebert authored a doctoral thesis and multiple papers on the materials science of CIGS semiconductor materials, which is closely related to the materials developed at UbiQD. He also served as a consultant to Nanosolar, a CIGS nanocrystal solar cell manufacturing company. Hebert has industry experience having co-founded Dr. Jolly’s, a leading cultivation and distribution operation in Bend, OR.

Tania Lafaille

Sales Representative

Tania is a UbiGro Sales Representative, with over 7 years of experience in product sales (specifically berries and avocados) covering all of North America and parts of South America. While in agriculture, Tania has cultivated strong relationships with growers and distributors, granting her a unique insight into both perspectives. That understanding, paired with her fierce dedication to results, drives her fun and fiery commitment to her craft. Tania is based in Gilroy, CA.

Charles Parrish

Agricultural  Engineer

Charles earned a Bachelor’s in Biological Engineering from North Carolina State University and a Master’s in Biosystems Engineering from The University of Arizona Controlled Environment Agriculture Center. Advised by Dr. Gene Giacomelli, Charles conducted his thesis on the “Optimization of Spectral Quality with Quantum Dots to Enhance Crop Yield in Controlled Environments.” Charles has a decade of biological engineering, greenhouse technology, and molecular biology experience from lab to production scale including working with the Vegetable Production System (Veggie) at NASA’s Kennedy Space Center. He brings his experience in hydroponics, controlled environment systems design, photobiology, greenhouse engineering, and scientific outreach.

Jim Gideon

Sales Manager

Jim Gideon is an UbiGro Sales Manager, with over 25 years of greenhouse industry sales experience covering all of North America. Previously Jim has worked for Green Tek, Plazit-Polygal, Texel, Cherry Creek, and Nexus. He is based in Montgomery, AL, and Jim believes that “light is everything to the grower.”

Eric Moody

Director of Sales

Eric Moody is UbiQD’s Director of UbiGro Sales. Eric has more than 6 years of experience in horticulture lighting industry, building relationships with greenhouse growers of all sizes and crops on optimal lighting for their growing operation, and most recently managed a North American sales team for PL Light Systems. Overall, Eric has been in sales leadership positions for more than 13 years. Eric brings with him a great understanding of the market and available technologies for growers, greenhouse facilities, and sales leadership. Reach Eric by phone at 541-490-6421 or by email at [email protected].

Mike Burrows, PhD

VP of Business Development

Dr. Michael Burrows is UbiQd’s Vice President of Business Development. His educational background includes a Materials Science doctorate from the University of Delaware and an MBA from Duke University Fuqua School of Business. His career has specialized in the commercialization of novel electronic materials in venture-run programs for different industries including solar, biosensors, and the automotive industry. In both start-up and corporate environments, he has extensive experience in global market development, foraging supply chain partnerships, productization, and brand building. He is currently leading UbiQD’s partnership efforts in luminescent greenhouse technology, smart windows, and security ventures.

Matt Bergern, PhD

Cheif Product Officer

As Chief Product Officer at UbiQD, Dr. Matt Bergren leads the company’s product development efforts, sales, and product manufacturing, including the company’s first commercial agriculture product, UbiGro. He plays a critical role in continuing the company’s path of technology development and vision of powering product innovations in agriculture, clean energy, and security.

He serves as the principal investigator for UbiQD’s contract with NASA, focused on tailoring the solar spectrum for enhanced crop production for space missions. Dr. Bergren’s leadership experience includes serving on the board of directors for the New Mexico Energy Manufacturing Institute, focused on job creation in New Mexico’s energy, and related manufacturing community.