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Controlled Environment Agriculture: the Inside Scoop on Indoor Ag

Raging wildfires. Extreme droughts. Violent hurricanes. Rogue tornadoes… Nature is unpredictable.

2020 was a record-setting year for natural disasters, and 2021 has already witnessed numerous extreme weather events. Meanwhile, experts predict that the frequency and severity of storms is only rising.

California’s Dixie Wildfire, August 2021.

Nature is unpredictable, yet her whims govern our most fundamental need: food. Worldwide, droughts, flooding, and famine are an all too familiar story. One in every nine people is hungry, while one in three is malnourished.

As our global population nears 8 billion, it is imperative that we create a reliable, resilient agriculture system, one insulated from nature’s caprices. A solution may lie in CEA.

What is CEA?

CEA, or Controlled Environment Agriculture, wields cutting-edge horticultural, engineering, and computer technologies to produce high-quality crops in efficient, indoor environments. Bringing crops indoors shields them from pests, disease, and extreme weather, permits year-round growth, and facilitates cultivation of plants in any climate zone.

A rapidly evolving field, CEA nevertheless started simply: beginning in the first century A.D., the Romans used rudimentary greenhouses to protect crops during the winter. Over time, greenhouses became more sophisticated: their walls were built of glass, warm water heated them in winter, and electric light bulbs provided supplemental lighting. Today, advanced greenhouses optimize plant growth conditions: computer systems control brightness, temperature, humidity, and even carbon dioxide levels.

Vertical Farming: the Up- and Downsides

Traditional greenhouses, however, are only the beginning of CEA’s many techniques. Global population projections—over 10 billion people (80% of whom will live in cities) by 2050—encourage scientists to develop new, compact farming methods like vertical farming. Vertical farms turn traditional farms sideways. In vertical farming, plants are stacked one atop another as they grow. The resulting farm is both space efficient—vertical farms can be placed in basements or old shipping containers—and water efficient—vertical farming’s water use is 5% that of standard agriculture.

Nevertheless, vertical farming has downsides. One major challenge is lighting. Each plant contained in a vertical stack requires adequate light to grow. Because the uppermost plants shield lower plants from overhead light, each individual layer of a vertical farm must also be lit. The resultant need for numerous LED lamps increases input costs (and, in turn, crop prices) and lowers vertical farming’s energy efficiency. Additionally, vertical farms pose challenges to workers, who often spend their days ascending and descending costly, cumbersome scissor lifts to complete tasks like planting and harvesting on each layer.

A vertical farm.

The benefits of indoor horizontal farms, therefore, should not be underestimated. One innovative horizontal farming operation is Pure Green Farms. Located in South Bend, Indiana, Pure Green Farms’ horizontal greenhouse relies on natural light and uses minimal artificial lighting to increase energy efficiency. Additionally, the entire planting and harvesting process is automated, creating a more uniform product and labor savings compared to traditional production.

Horizontal farms also offer opportunities to combat microclimates, unintentional byproducts of CEA. One greenhouse contains numerous microclimates—slight shifts in location can significantly alter plants’ growing conditions. For instance, a plant directly beneath a growth lamp may be subjected to higher temperatures and brighter light than the plant beside it. Such inconsistent growing conditions in turn produce inconsistent crops.

Purdue University researchers recently constructed an automated horizontal greenhouse to address this problem: plants constantly circulate around the greenhouse on conveyor belts. Consequently, no plant remains in one microclimate for too long, and all plants are exposed to nearly uniform conditions. This innovation allows horizontal farms to produce more consistent crops.


In both vertical and horizontal CEA agriculture, farmers are looking beyond soil. For instance, many CEA farms are hydroponic: plant roots are submerged in regulated, nutrient-rich water solutions rather than soil. Hydroponics not only allows detailed regulation of nutrient and pH levels but also minimizes water usage by recirculating water. Further, hydroponics allows plants to grow more quickly and closer together.

A hydroponic greenhouse.

One variation on hydroponics is aeroponics: plant roots are placed not in soil but simply in the air. Surrounded by oxygen, vital for cellular respiration, plants are frequently sprayed with mist containing water and dissolved nutrients. This process not only reduces water usage by up to 98% but also increases plant nutrient levels, offering potential health benefits for consumers.

Another twist on hydroponics is aquaponics, in which a plant growth environment is coupled with a fish tank. Fish provide nutrients for the plants, which in turn clean the water for the fish. Nevertheless, the aquaponic system is not perfectly self-sufficient: aquaponics requires significant electricity to heat and circulate water and often utilizes supplemental water filtration systems.

Cost-Benefit Analysis

The benefits of CEA are numerous. By growing plants inside, CEA minimizes or even eliminates the need for pesticides, which are not only potentially detrimental to human health but are highly water-intensive to produce. Additionally, grown in optimal conditions, plants mature faster and more consistently. With CEA, crops can be grown in population-dense urban areas; thus, fresh, nutritious, locally grown crops can be delivered at reduced transportation costs.

CEA’s advantages, however, come at a high monetary cost. CEA technology is expensive. Simply building a modern greenhouse equipped with LED lights, O2 and CO2 monitors, and ventilation systems is a costly enterprise. Additionally, CEA requires a constant supply of electricity, which is both expensive and poses environmental risks. Even greenhouses powered solely by renewable energy create challenges: solar panels, for instance, are expensive. Further, using solar energy to simulate sunlight for indoor crops seems convoluted, especially considering that outdoor crops simply use free, natural sunlight. CEA also requires space. In urban areas, where CEA offers great potential, real estate is especially expensive.

The many costs of CEA often translate to higher prices for consumers, especially for commodity crops. For instance, producing a loaf of bread with CEA-grown wheat costs roughly $11. Currently, CEA is most economically viable for expensive, highly perishable specialty crops, such as tomatoes and lettuce, grown on a large scale.

Investment Opportunities

Although CEA is not set to replace traditional agriculture in the near future, investors are nevertheless exploring CEA’s potential for feeding our growing population sustainably. There exist several private fund investments in the space. Ceres Partners, for instance, is investing in greenhouses, aquaculture, and specialty crops as well as CEA artificial intelligence systems. Equilibrium Capital, a sustainability-focused investment company, manages an extensive CEA private equity fund platform.

An exciting new investment opportunity in this area is Global X AgTech & Food Innovation ETF – KROP, first listed on Nasdaq in July of 2021. KROP identifies and invests in trailblazing companies in the food and agriculture sectors. The focus of these companies ranges from food waste minimization to agricultural robots to dairy alternatives to CEA. KROP has only $2.3 million under management today, but we will continue to monitor its development as a potential purposeful investment in the essential food and agriculture sector.

As the global population continues to grow, nature’s unpredictability poses a hazard to the traditional agricultural system. Boasting efficiency and reliability, CEA offers a promising niche complement to traditional outdoor agriculture and an exciting opportunity for sustainable innovation for the benefit of humanity and the planet. To learn more about sustainable, ethical investing, contact Servant Financial today.

Investing with Purpose: Mid-Year Reflections and Resolutions

Investing with Purpose isn’t an oxymoron. At Servant Financial, we believe that profit and principles go hand-in-hand. In early 2021, we identified five purposeful investing opportunities for this year and beyond. In light of the COVID pandemic, turbulent economic conditions, and the accelerating sustainability movement, we predicted growth in ESG investments, alternative investments, essential businesses, inflation hedges, and education.

As we pass the halfway point of 2021, we take the opportunity to reflect: were our predictions directionally accurate? Simultaneously, we look forward: what developments do we expect over the remainder of the year and beyond?

1. ESG Investments

ESG, or environmental, social, governance, refers to a company’s attitude and behavior toward its employees and community. ESG investing prioritizes the wellbeing of employees, society, and the earth. This trend is especially appealing to millennials and women, who continue to demonstrate their support for ESG investments in 2021.

In the first quarter of 2021, US sustainable funds set a new net inflow record of $21.5 billion. One analysis of 27 ESG funds from December 31, 2020 to May 17, 2021, found that 16 of the funds outperformed the S&P 500. ESG has become a momentum factor, as ESG funds and their underlying equities attract more fund flows which beget more fund flows. Experts predict that the sustainability market will only continue its tremendous growth—by 2030, the ESG market could reach $1 trillion.

Servant Financial’s ESG research continued in 2021. In recent articles, we explored markets and trends in energy storage, organics, and carbon credits. At Servant Financial, we are committed to learning and innovation to help you invest in a sustainable future.

2. Alternative Investments

Alternative, or nontraditional, investments not only diversify your investment portfolio but have tremendous potential to benefit communities in unique ways. Alternative investments look beyond traditional stocks and bonds: real estate, infrastructure, gold, and bitcoin are just a few of the myriad alternative investing possibilities.

Servant Financial has identified farmland as a meaningful and profitable alternative investment. Traditionally, the farmland market has boasted high returns and low volatility; furthermore, investors profit not only from land value appreciation but also regular rent collection.

Farmland, however, is more than a vehicle for profit—it provides a means for doing good. In January 2021, Servant Financial partnered with Farmland Partners (NYSE: FPI), the farmland industry’s leading REIT,  to launch the Promised Land Opportunity Zone Fund. Promised Land purchases farmland in Qualified Opportunity Zones, economically-challenged areas designated by the IRS for preferential tax treatment. After acquiring the properties, Promised Land improves the farmland, perhaps by upgrading irrigation and drainage systems, increasing grain storage, or installing solar panels or wind turbines. In turn, land improvements benefit investors and farmers and revitalize rural communities.

Since its launch, Promised Land has acquired over 3,700 acres of farmland in three states, and the fund continues to grow. Witnessing our Promised Land vision materialize encourages us to continue to invest with purpose.

3. Essential Businesses

Over the past 16 months, the tumultuous events of the COVID pandemic have underscored the necessity of essential businesses. Crisis forced reconsideration of priorities, needs, and wants: ultimately, humans need food, shelter, healthcare, and energy. Over the past months, essential industries have demonstrated substantial growth, with impressive performances from the energy, real estate, and healthcare sectors.

Investing in these essentials, however, is not only financially savvy but socially impactful. In a recent article on the food industry, we highlighted the prevalence of food insecurity in America. Tragically, over 10% of American households experienced food insecurity in 2019. Further, about 19 million Americans live in food deserts, areas with limited access to food. Especially vulnerable to food insecurity are rural counties: 87% of the least food-secure counties are rural.

US food desert map.

These surprising, grievous statistics motivated us to take action. Why not augment Promised Land’s strategy—investing in and actively improving farmland in rural Opportunity Zones—to combat food insecurity in these communities? Currently, we are mapping the overlap between food deserts and Opportunity Zones. After identifying target counties, we plan to evaluate strategies and partnerships to invest in and improve food access in these vulnerable regions. Our two-pronged approach—improving both farmland and food access—will address food insecurity on both the production and distribution levels.

4. Inflation Hedges

Groceries, gas, hotels, hospitals: as any post-COVID consumer can attest, prices are on the rise. In the past year, prices have increased by 5.5%, the highest rate of inflation since 2008. While economists foresaw price jumps in the wake of the economic emergence from the pandemic, inflation rates have been higher than predicted. Although many experts are hopeful that inflation rates will dissipate as economic conditions normalize, continued inflation is a distinct and alarming possibility.

High inflation rates threaten investors; investment shares may be stable or increase in price, but if their growth rates cannot keep up with inflation, then these assets lose real worth.  For example, US 10-year treasuries nominally yielding 1.3% have a negative real yield of (4.2%) with an inflation rate of 5.5%. Intent on protecting the value of their assets, investors are increasingly turning to inflation hedges, investments which boast relatively stable or diminishing supplies, i.e. scarcity value. While the value of the dollar decreases, inflation hedges like gold, bitcoin, commodities, and real estate resist price fluctuations or may rise in value with inflation.  For example, farmland values are highly correlated with inflation.

Correspondingly, the prices of inflation-protected assets are important indicators of current inflation trends. Although gold value has slightly declined in the past twelve months, prices remain significantly higher than before the outbreak of the pandemic. Meanwhile, bitcoin prices have fluctuated greatly over the course of the pandemic; nevertheless, bitcoin prices are currently three times the price of twelve months ago.

As Federal Reserve Chairman Jerome Powell’s recent comments indicate, inflation rates will likely remain high in the coming months; the Fed has signaled markets that it will allow near-term inflation to run higher than its 2.0% inflation target. Consequently, savvy investors should consider safeguarding their portfolios with inflation hedges.

5. Education

Education is both personally and economically empowering. Teaching skills essential for high-wage jobs, education develops human capital, increases earning power, and alleviates poverty. According to UNICEF, an individual’s income increases 10% with every year of education received.

Conversely, barriers to a quality education hinder development; this fact has caused particular alarm during the pandemic, as many students were forced to pivot to virtual or hybrid learning. The fallout from this transition is staggering: 97% of educators report that students experienced at least some learning loss, while 53% described that learning loss as significant. This learning loss translates to real earning loss. McKinsey & Company predicts that white students will experience a 1.6% annual income reduction and Black students a 3.3% annual income reduction because of substandard virtual learning.

Educators report learning losses during the pandemic.

As these disturbing statistics indicate, improving and investing in education and educational infrastructure is urgent. Edtech companies are one appealing option. Innovative technologies enable independent learning and could allow students to make up for learning loss. Further, as the pandemic’s resolution remains uncertain, developing more effective virtual learning technologies and investing in broadband and other infrastructure in low-income communities is crucial.

Charter schools, high in demand especially in low-income communities, provide another investment opportunity. Investors can provide low-interest loans or purchase charter school bonds.

Finally, we believe there exists a strong correlation between Opportunity Zones (low income communities), food deserts, and educational deserts. In the coming months, we plan to explore this overlap and devise investment strategies to improve the lives of children and families across the country.


2021 has witnessed both frustration and excitement, turmoil and healing. Although the details of our post-COVID world remain uncertain, we are hopeful that the future will bring stability and opportunity. As we reflect on the past six months, we remain confident that our investments can build a bold, auspicious tomorrow. ESG investments, alternative investments, essential businesses, inflation hedges, and education provide opportunities to make a profit while making a difference. From farmland to food access, education to renewable energy, investing with purpose addresses societal challenges with integrity, creativity, and compassion.

Promises and Pitfalls: the Uncertain Future of Carbon Credits

Modern-day Americans enjoy a standard of living that our forebears could only have dreamed of. Cell phones and computers, ready-made clothes and food, airplanes, microwaves, and air conditioning contribute to our convenient, comfortable existence. We can access food, transportation, friends, and entertainment with a few choice taps of a handheld screen. Still, our easy modern lifestyle has drawbacks. Although we no longer rely on bodily energy to heat our houses, travel, and obtain food, these activities nevertheless require energy—mechanical energy. Today, humans benefit from the convenience of an industrialized world… but at what cost?

5.1 billion metric tons. That’s the amount of energy-related carbon dioxide the US emitted in 2019 alone. Carbon dioxide, or CO2, is a greenhouse gas. Like methane and nitrous oxides, CO2 traps heat in earth’s atmosphere—the so-called “greenhouse effect” keeps our planet warm and hospitable for life. However, many scientists suspect that the rise of human industry, especially in the past two centuries, has unnaturally elevated atmospheric CO2 levels, which, in turn, result in climate change.

CO2 levels over time

Rising ocean levels, droughts, and severe storms are just some of the phenomena attributed to climate change, a controversial issue, to say the least. While some experts believe that climate change poses a dire threat to our planet, others are more reserved. These climate change “skeptics” do not necessarily deny climate change; rather, they believe its severity and its connection with CO2 levels are exaggerated.

However one views the climate controversy, all can agree that climate change is an influential political issue. Intent on mitigating the “climate crisis,” activists are targeting all areas of human activity in the name of the environment. Business and industry, closely tied with fossil fuels and greenhouse gas emissions, are an especial focus. Environmentalists have proposed numerous plans to regulate, limit, and improve industry with the ultimate goal of net-zero emissions. One particular strategy, although still nascent, is gaining prominence: carbon credits.

What are Carbon Credits?

Harnessing the power of markets, carbon credits incentivize businesses to reduce greenhouse gas emissions. A carbon credit, also known as a carbon offset, is a license to emit one metric ton of CO2 or the equivalent amount of another greenhouse gas. Based on its size and nature, a business receives a certain number of carbon credits. If a business desires to emit more CO2 than its credits permit, that company must purchase subsequent carbon credits. Conversely, should a business emit less CO2 than its allocated carbon credits allow, the company may sell its unused credits. Furthermore, businesses which actively engage in carbon sequestration (for instance, by planting forests, reducing tillage, or implementing crop rotation) are awarded carbon credits. In this way, businesses are penalized for increasing emissions and profit from reducing emissions.

Currently, participation in the carbon market is voluntary.  Committed to achieving net-zero emissions, numerous corporations—including IBM and JPMorgan Chase—are purchasing carbon credits through Indigo Ag’s carbon marketplace. Indigo not only advises farmers as they implement carbon sequestration but also verifies the efficacy of these methods by analyzing agricultural data and soil samples. Successful sequestration produces verified agricultural carbon credits. When eco-conscious companies purchase credits through Indigo’s marketplace, farmers profit. Other groups at the forefront of the carbon offset initiative include Nori, a carbon marketplace similar to Indigo, and Verra, which develops standards for awarding carbon credits.

Iowa farmer sequesters CO2 for cash through Nori

Many climate activists envision a compulsory carbon market, known as a compliance market. In this scenario, the government mandates and regulates the carbon market in a cap-and-trade system. Government officials allocate carbon credits, oversee their trade and creation, and certify that businesses comply with emissions requirements. Select jurisdictions, including California and Europe, have already implemented partial compliance markets for certain companies or industries.

Controversies and Concerns

Like the problem it proposes to solve, the carbon market is controversial. Most obvious are the logistical issues: in a compliance market, how will carbon credits be allocated? Will individuals or only companies be compelled to participate in the market? How will carbon pollution be measured? Must every pollution-producing activity, no matter how minuscule, be reported to government regulators? How will startups be treated? Will carbon credits cripple innovation? Cheating is also a concern. Selling phony carbon credits, underreporting carbon emissions, and double-counting carbon sequestration practices are just some of the many opportunities for dishonesty.

Additionally, some environmentalists argue that carbon credits will actually harm the environment by taking the onus off of major polluters. Rather than compelling large corporations to reduce their personal carbon emissions, the carbon market allows them to take credit for the carbon reduction of others. Why should companies change their reliably profitable practices when carbon credits allow them to keep polluting for a small fee?

Furthermore, is agricultural carbon sequestration actually effective? Studies measuring CO2 levels only in the soil’s upper inches produce optimistic findings; when scientists dig deeper, however, the results are less encouraging. Several comprehensive studies show that no-till methods merely change the distribution of CO2 in the soil—more CO2 is stored in the upper layers than the lower layers—rather than sequester more total carbon. Other scientists are skeptical of the benefits of cover crops, which may actually induce microbes to release carbon from the soil into the atmosphere.

Although their prudence and efficacy remain uncertain, carbon credits are indicative of the larger ESG investing trend. Eco-conscious companies, policymakers, and investors are turning to markets to encourage responsible business practices and forge a sustainable future. To learn more about investing with purpose in ESG, contact Servant Financial today.

Fad or Fact? Investing in Organics

From fruit to baked goods, burgers to craft beer, organic is in. In 2016, 82% of Americans reported purchasing organic food. From 2010 to 2018, the organic market grew at least 5 percent annually, and researchers forecast that this incredible growth will only continue. But what is organic food? And is the premium cost really worth it?

Organics Overview

American-grown organics are certified by the US Department of Agriculture (USDA) following a complex set of regulations. Overall, organic farming maximizes natural methods—employing animal or green manures, crop rotation, cover crops, and open grazing, for instance—and limits synthetic methods, including genetic engineering and artificial soil treatments. The details of the intricate balance between natural and synthetic, however, are complicated. For instance, an organic product cannot contain any genetically-modified organisms, or GMOs; however, certain synthetic fertilizers may be used for prescribed purposes in limited amounts. Organic livestock may receive chemical vaccinations; however, the administration of drugs to organic livestock is severely limited.

Ultimately, crops and fresh produce with the USDA organic seal must be grown on soil free from prohibited substances for at least three years. Organic meat is produced from livestock free from hormones and antibiotics, nourished solely on organic feed, and allowed to graze freely. Finally, processed foods labeled organic must contain at least 95% certified organic ingredients (discounting water and salt); the remaining 5% of ingredients—items like cornstarch, gelatin, and dairy cultures—must be produced without GMOs, ionizing radiation, or sewage sludge.

USDA organics factsheet

Is It Really Organic?

Despite the detailed, complex requirements of organic classification, not all “organics” are created—or produced—equal. The USDA relies on accredited certifying agents to approve organic farms. Annual farm audits largely entail inspection of paperwork and a visit to the farm. Only 5% of the time do certifiers physically test soil and farm products for prohibited substances. Infrequent testing leaves room for violation—whether accidental or deliberate—and calls into question the reliability of the organic seal.

Certifying agents also have a conflict of interest—they compete with one another to certify farms and receive payment from the farmers they inspect. If inspectors fail a farm, that farm will not apply for organic status next year—representing a future loss of money—and other farms might hesitate to enlist the strict certifier’s services. Such a system incentivizes leniency. According to a Wall Street Journal study, almost 50% of certifying agents did not enforce rudimentary USDA requirements one or more times between 2005 and 2014, while the USDA deemed inspections of two in five certifiers insufficient in that period

Finally, many organic products are imported. Nominally, these items are held to USDA standards, but many are skeptical of overseas inspections by non-US certifiers. Furthermore, complex global supply chains allow much opportunity for mistakes and fabrication.

Nevertheless, known organic violations are relatively rare. For instance, a USDA study in 2010-2011 tested 571 organic fruit and vegetable samples for residue of 200 nonorganic pesticides. Although the study was limited in scope, results were encouraging: only 4% of samples violated pesticide residue limits, while 57% contained no traces of pesticides whatsoever.

Pesticide residues on organic food samples in 2010-11 USDA study

Human and Environmental Health

Consumers pay a premium for organics, which are often marketed as safer and more wholesome than conventionally produced foods. However, the health and safety benefits are uncertain. Nutrient levels of organic produce are nearly identical to those of their conventionally-grown counterparts. “I don’t see any nutritional reasons to choose organic foods over conventional,” says one Harvard-affiliated nutritionist. Distance from farm to market, time between harvest and consumption, and preparation style may be more crucial considerations for nutrition-conscious consumers.

Organic foods also contain lower levels of pesticides. All pesticides are toxic, yet there is little evidence that trace amounts of pesticides harm consumers. Furthermore, the safety of permissible organic pesticides compared with conventional pesticides is uncertain. Consumers concerned with farm worker safety must be aware that all pesticides carry a risk. Typically, organic pesticides have lower chronic and acute toxicity levels than restricted use pesticides. However, long-term exposure or improper handling, even of organic pesticides, can harm farm workers’ health, while training and protective gear can shield workers from the detriments of both synthetic and organic pesticides.

Organic farming also impacts environmental health, for better or worse. According to the UN, organic practices maintain biodiversity, sequester carbon in the soil, reduce groundwater pollution, and improve soil health. However, experts believe some organic methods are more harmful than conventional methods. Recently, scientists called out South Dakota’s Gunsmoke Farms, which transitioned from conventional to organic farming, for harming soil health. Rather than using chemical pesticides to target weeds, Gunsmoke Farms tilled the fields and disturbed fragile soil. Overall, organic and conventional farming both have their merits. In some areas—such as energy use—organic farming is greener than conventional farming, while in other areas—like land use—conventional farming is the clear winner.

Markets and Investment

Despite the uncertain benefits of organics, demand is sustained and the market is growing. In 2018, the value of the organic market surpassed $50 billion. Supply and demand levels, too, are favorable for investors: 5.7% of the food market is organic, while just 0.9% of farmland is organic. Prices reflect this trend: a recent National Retail Report found that consumers generally pay significant double-digit premiums—surpassing 200% on certain products—for organics.

As demand continues to outstrip supply and organics fetch high prices, market-wise investors are looking to cash in on the trend. Natural food manufacturers and grocery stores, such as Hain Celestial and Whole Foods (owned by Amazon), provide opportunity for traditional investment. Perhaps the most interesting opportunity from a risk-adjusted return basis on the “healthy eating” theme is United Natural Foods (UNFI), a natural and organic food distributor supplying stores including Whole Foods and Roundy’s Supermarket. UNFI is trading at a very modest 9 times forward Price-to-Earnings ratio and 1.6 times its book value. Investors can also consider large grocery chains, like Costco and Walmart, with their own organic store brands.

The organic market also abounds with alternative investment opportunities. Groups like Farmland LP and SLM Partners are investing directly in the land by converting farms from conventional to organic. The three-year transition period required by the USDA challenges many small farmers, who input much time and money into their land but are unable to market their food as organic during this time. Farmland LP and similar organizations, however, support farmers during this transition. When their products are classified as organic three years later, farmers ultimately reap higher profits.

Many farmers and farmland investors will not stop with organic certification. They will continue to guide organic and more sustainable farm management practices with innovative, environmentally-conscious methods, like improved irrigation and crop rotation. These practices aim to maximize soil and crop health, an endeavor from which farmers, consumers, and investors all can benefit.

To learn more about investing in organics and other “farm to future” themes, contact Servant Financial today.

Food: from Farm to Future

Personal technology devices. Online delivery services. Life insurance. Even gas and oil… Technically speaking, all of these items and services are optional; although we might not enjoy the resulting lifestyle changes, we could live without them.

What isn’t optional? Food.

Two major consequences derive from our dependence on food and agriculture. First, food and agriculture are enduring markets. Though perhaps not as lucrative or thrilling as Big Tech investing, agriculture and farmland are not going away any time soon. Historically, the farmland market has been generally resistant to market fluctuations of boom and bust economic cycles. Farmland is an alternative investment, like traditional real estate in office or multifamily buildings, that provides unique opportunities for diversifying investment portfolios given its low correlation to traditional stock and bond portfolios. Today, however, there are limited options in public, liquid securities markets to invest in farmland.

Secondly, food is non-negotiable for human survival. Therefore, as a species, we have a philanthropic responsibility to ensure that all people have reliable access to nutritious food. Investing in agriculture, food distribution, and land improvement is not only economically rational but ethically impactful.

Food Security

World hunger— the phrase often conjures images of malnourished residents of Third-World countries. Tragically, hunger is a major issue not only in developing countries but even in highly industrialized nations. 1 in 9 Americans suffers from food insecurity, defined by the USDA as “limited or uncertain access to adequate food.” This means that 26 million adults and 11 million children lack reliable access to nutritious food in the US alone. Those figures suggest systemic problems and perhaps endemically poor allocation of an abundant resource.

COVID-19 has only worsened the food insecurity crisis. Northwestern researchers estimate that 23% of all American households and 30% of US households with children experienced food insecurity in the past year. In a nation where annual food waste in family households totals 54 billion pounds, manufacturers and restaurants throw away 52 billion pounds of food, and 20 billion pounds of food grown is left to decay in farm fields, food waste and insecurity are unacceptable byproducts of inefficiencies in our modern, technologically advanced society.

An illustration of annual food waste in America


The issue, clearly, is not an inadequate supply of food; the US produces enough food to nourish every single American. Instead, distribution is the primary challenge: how do we ensure that food is efficiently and compassionately apportioned? To solve this question, we must first understand food flow networks.

Food Flow Networks

Food flow networks, or interconnected food supply chains, map the often winding and unpredictable path that food travels from farm to table. Certain foods follow a straightforward route—milk, for instance, is first bottled, then pasteurized. Afterwards, it is shipped to distribution centers and then transported to supermarkets. The same milk, however, could take a more circuitous path, perhaps being converted into cheese, powdered milk, or yogurt. Each of these dairy products could be packaged and distributed alone or as an ingredient in other processed foods.

Food flow networks not only outline the steps in the distribution process but also consider geography. Where food is produced, the distance it travels, and where it ends up are critical logistical elements to maximizing food security.

Food Production

The top ten crop-producing states are California, Iowa, Nebraska, Texas, Minnesota, Illinois, Kansas, Wisconsin, North Carolina, and Indiana. Together, they account for nearly 55% of US crop sales. This concentration reflects these state’s weather and topographical endowments and the trend toward larger farms—as the size of the average American farm increases, the total number of farms has been decreasing. Consequently, the percentage of farmland operated by small-scale farms is decreasing. The graph below illustrates the evolution over time from small, primarily subsistence farms to larger, primarily industrial farms.

Size and number of farms from 1850 to 2019

US policy safeguards the strategic aspects of our nation’s food supply and so may favor large, wealthy farms over their smaller counterparts. According to the Heritage Foundation, commercial farms, 10% of all farms in the US, received 73% of commodity payments and 83% of crop insurance indemnities in 2016. Small family farms, the remaining 90% of US farms, received only 27% of commodity payments and 17% of crop insurance indemnities that same year.

Farm concentration is highly controversial. Supporters assert that industrial agriculture increases efficiency and output. Critics from across the political spectrum, however, argue that industrial farming impoverishes rural communities, damages the environment, and harms consumers.

This controversy should be viewed in light of facts rather than emotional appeals and generalizations.  Despite its imperfections, the modern agriculture system certainly has improved in efficiency and output. According to John Deere, 83 hours of labor and 2.5 acres of land were required to produce 100 bushels of corn in 1850. As of 2016, only 2 hours of labor and 0.6 acres of land were necessary. Moreover, despite concerns about environmental harm from farming, recent technological advances allow farmers to decrease pesticide, fertilizer, land, and water usage. Sustainable and organic farming technology, still a budding field, benefits environmental and community health and lowers food prices for consumers.  More on this nascent, sustainably-focused competition to industrialized farming may appear in future articles.

Food Processing

After food is harvested, it is taken to be processed. Like farming, food processing is growing more concentrated. Food processing facilities, largely located in California, New York, and Texas, are increasing in size, while food processing companies are likewise consolidating.

Companies also increasingly employ vertical integration, the practice of controlling multiple steps in the food production process. For instance, a beef company might own cattle-breeding facilities, feed mills, slaughterhouses, and processing plants. Once again, consolidation and integration are controversial and complex trends. Much like other U.S. sectors such as healthcare, certain elements of the U.S. agricultural and food chain have pursued efficiency and have concentrated operations to such an extent that the system has no redundancies and lacks resiliency should their operations be disrupted.

The COVID pandemic illustrates these difficulties. When just a few large groups lead the agriculture and production markets, a disturbance in any producer disrupts the food supply for many consumers. Thus, COVID outbreaks in meat-processing plants forced farmers to euthanize 2 million chickens and 300,000-800,000 pigs, while variations in consumer demand left the food supply chain spluttering. To avoid future food supply disruptions, the food network of the future must balance efficiency and redundancy, large industrial farms to promote food security in commodity-type products like corn, soy and wheat and small, niche community farms for organic or fresh “farm to table” quality products like fresh vegetables, fruit, and nuts.


Finally, food flow networks culminate with distribution to consumers. Numerous factors influence food distribution. Businesses consider not only population and location but socio-economic conditions as well. Consequently, low-income and sparsely populated areas face unreliable food supplies. According to Feeding America, 64% of the least food secure counties face exceptional poverty. Regionally, rural counties are disproportionately food insecure, and the South is the least food secure area. Significant racial disparities also exist, with minorities facing food insecurity at alarming rates.

Rural versus urban and regional food insecurity in America

Many highly food-insecure areas are categorized by the USDA as “food deserts,” places where adequate, nutritious food is not readily accessible. NPR reports that 19 million Americans live in food deserts. Several large grocers and retailers, such as Walmart and dollar stores, have attempted to fill this gap. The chains’ entrance into food-insecure areas, however, is controversial—these large companies can undercut local grocers, causing more concentration in the local food market. Meanwhile, dollar stores, with appealing price tags (though high unit costs), generally supply processed foods rather than nutritious produce. Unfortunately, the prevalence of processed foods reinforces the tragic link between poverty and obesity.

Strategies and Solutions

Opportunities to combat food insecurity exist at all levels of the food flow network. Servant Financial is presently focusing its resources on potential investment opportunities in a “barbell” of impact. First, we are investing in productivity improvements at the start of the food chain on the farm. Second, we are exploring innovative investments in food distribution infrastructure to serve those communities with the greatest food insecurity: food deserts. We believe this two-part investment approach will improve food production and ultimately mitigate the effects of poverty and food insecurity at the consumer level.

Farmland Improvement

Farmland improvement targets the very roots of the food flow network. Investing in farmland enhances food quality and supply as well as human and environmental wellbeing. As noted above, farms are rapidly consolidating—large, industrial farms are gobbling up their smaller counterparts. The economics of highly mechanized farming and the need for scale to spread the fixed cost of the equipment over more acreage make it very difficult for very small farms (sub 100 acres) to succeed unless they simply become a farmland owner and lease the farm to a scaled operator.  This behind-the-scenes operational consolidation has been occurring across multi-generational landholding and farm-operating families for decades.

Investing in farmland in Qualified Opportunity Zones (QOZ) seeks to improve the productive capacity of farmland and create jobs and economic benefits to rural American communities.  QOZs are designated economically-challenged regions in which investment is encouraged by preferential tax treatment. Investors can defer capital gains taxes rolled into a QOZ until the earlier of 2026 or as long as they hold the investment.  Additionally, investors benefit from a 10% exclusion of the capital gain deferred if they maintain the investment for at least five years.  Further, if the taxpayer holds a QOZ investment for 10 years there is a permanent exclusion on the appreciation of their investment.

Farmland improvement in QOZs revitalizes small farms in struggling regions. Investments take various forms, from improving water drainage, to building new grain storage, to enhancing irrigation systems, to improving soil quality, to developing renewable power generators and adjacent energy storage. Ultimately, these investments impact farmers, who benefit from farming productivity improvements and increased profits; laborers, who experience greater job security; and consumers, who have more reliable access to locally-grown food. Indeed, the benefits continue, as investing in farmland in QOZs may even be supportive of sustainable and organic farming practices.  Stay tuned for more information on Promised Land Opportunity Zone Fund I, LLC’s farmland investment activities and its strategic alliance with Farmland Partners.

Food Banks and Pantries

Food banks and pantries address hunger directly by serving food-insecure families. Food banks are depositories that store large quantities of food. Items are transported from food banks to food pantries, local centers generally run by community-based not-for-profits which distribute food to individuals.

Most items in food banks and pantries are donated by individuals and businesses. Farms, restaurants, and grocery stores often have more food than they can sell. By redirecting this supply to food banks, businesses not only nourish our communities but combat the massive systemic food waste outlined earlier. Federal programs, too, supply food banks by purchasing items from farmers. In 2020, such USDA programs provided 1.7 billion meals. Finally, food banks and pantries can purchase food themselves with donated money.

Despite their noble goal, food banks do face some criticism. Because they are often volunteer-run, food banks usually operate on a limited schedule. Reliant on donations, many food banks offer a limited selection, often lacking in fresh dairy and produce. The overall quantity and variety of food available at food banks can be low. Yet another dilemma is the stigma surrounding food pantries: many people who utilize food pantries experience feelings of shame and alienation and complain of unpleasant atmospheres. Unfortunately, this stigma discourages food bank use. A 2018 study among food-insecure college students revealed that stigma was the main obstacle to food pantry utilization.

In spite of these drawbacks, food bank use increased during the pandemic. Along with unemployment rates, the demand for food banks and pantries soared. Since March 2020, distribution by US food banks has grown by about 55%. Sadly, nearly 40% of food pantry patrons at the beginning of the pandemic were first-time users.

Increasing demand as well as criticisms of food pantries provide opportunities for improvement. One especially creative pantry network is the Greater Chicago Food Depository, or GCFD. GCFD recently provided grants to community not-for-profits to open four new pantries, which, when complete, will resemble traditional grocery stores. GCFD aims to facilitate the creation of pantries more responsive to community needs and desires. For instance, one community-based not-for-profit working with GCFD plans to accept feedback on food selection and to implement an online order and delivery service.

Patrons visit a GCFD food pantry during the pandemic

GCFD wants the pantries to be more than food distributors. They envision a pantry that is also a community center. Patrons will be able to enjoy a cup of coffee; participate in exercise, cooking, nutrition, and budgeting classes; send their children to extracurricular programs; and shop for food in one convenient, attractive space. Visiting these revitalized food pantries will not be dreary: it will be uplifting.

One successful, large scale community-based food security operation with limited publicity are the 138 bishop’s storehouses run by the Mormon Church.  The bishop’s storehouse system is a network of church-owned and -operated commodity resource centers. They function much like cashierless retail grocery stores, such as Amazon Go, but with a philanthropic wrinkle: goods cannot be bought at storehouses. Instead, they are distributed to needy individuals under the direction of church leaders.

The storehouses stock basic food and essential household items, produced largely from Mormon-owned agricultural properties, canneries, and light-manu­facturing operations. The entire system is vertically integrated from farming and harvesting through processing and distribution.

Needy recipients are invited to work or render service in various ways in exchange for goods.   This reciprocal exchange helps maintain the personal dignity and responsibility of the recipients, who do not view the food solely as a handout. All storehouse work is performed by volunteers.  The contribution of time, talents, and financial resources sustains the storehouse and the fabric of the community at large.

Yet another instance of innovation is Feeding America’s free-market approach to improving the efficiency of food distribution to its network of food banks and pantries.  Previously, Feeding America treated all food as interchangeable from an allocation and distribution perspective. Shipments to individual food banks were measured by weight rather than by nutritional variety and composition. Hindered by this defective central planning, Feeding America struggled to allocate food rationally and fairly. For instance, Feeding America sent loads of potatoes to Idaho food pantries, where locally-grown potatoes were bountiful. Meanwhile, food pantries in Alaska, short on potatoes, received an excessive supply of pickles.

Seeking to improve, Feeding America consulted University of Chicago economist Canice Prendergast. Prendergast realized that Feeding America’s central planning was hampering their efforts. The large, central organization lacked specific, local knowledge about the supplies and needs of individual food banks. To address this issue, Prendergast advocated a free-market approach to resource allocation. Feeding America created its own internal currency; the neediest food banks receive the largest amounts of “money,” while better-off food banks receive less currency. Using this money, individual food banks bid for shipments of food on an online platform. Food banks can also save up their money so they can bid more aggressively on particularly needed items. For instance, a bank might save its shares to purchase a large supply of peanut butter, a valuable food pantry favorite. Meanwhile, the prices of fresh produce and dairy generally stay lower because these perishable goods must be used immediately. Using this system, food banks in Feeding America’s network receive supplies that they and their customers desire and need.

Volunteering is not the only means of revolutionizing food pantries. With reimagination comes the opportunity for investment.  Long-term, low-interest loans allow nonprofits to open or improve food banks and pantries. Investors can also give short-term bridge loans, or grants much like GCFD, to provide nonprofits with much-needed capital to improve their infrastructure. These investments can be risky but rewarding: food pantries ultimately improve the health and wellbeing of our communities.

To win the battle against malnutrition and food insecurity, we must address both food production and distribution. Investing in farmland improvements and community-based food storehouses are just two possible areas of innovation in the food network that we are cultivating. The ultimate purpose of investing in farms and food distribution is not in the production and consumption functions but in sustaining the future of humanity.  Contact Servant Financial to learn more about investing with purpose in food and agriculture.

Solving the Renewables Riddle: Investing in Energy Storage

Imagine a world powered totally by renewable energy. One still, winter night, you nestle in your favorite chair, switch on the lamp beside you, and turn up the thermostat before watching a classic movie. The sun is not shining, the wind does not blow, and coal and natural gas have been out of use for decades. Still, you have access to the electricity necessary for light, heat, and playing an old film. How?


Energy storage is the key to this supply-and-demand riddle. Renewable energy can be supplied by the sun and wind only intermittently. The wind blows sporadically, and demand for energy often peaks when the sun is not shining. By reserving excess energy when output from renewable sources is high, energy storage systems create a reliable supply of energy when output is low but demand is high. Eliminating the need for carbon-based backup generators, energy storage systems are critical to a future of renewable energy.

Home energy use and solar energy production over one day. Although home energy use peaks when production is low, energy storage provides a reliable source of power at any time of day.


What is Energy Storage?


Energy storage is important to our everyday lives. Consider your cell phone–you do not always have access to a charger. Instead, you might charge your phone at night when you are not using it. The next day, you can use this stored energy. Even more fundamentally, your body stores energy. You cannot constantly eat and sleep. Instead, you perform these crucial activities to supply yourself with energy for future use.


Likewise, renewable energy sources fluctuate greatly based on time. Sunlight and wind supply vary greatly from season to season, day to night, and even from minute to minute. No human technology can control the weather. The flexibility of energy storage, however, makes up for the rigidity of renewable energy supply.


The National Renewable Energy Laboratory projects that in 2050, if the US uses 80% clean energy, 120 gigawatts of energy storage will be needed across the nation. A myriad of energy storage systems are being developed to fulfill this need.


Lithium-Ion Batteries


Best known of all energy storage systems are batteries, which are improving in efficiency and declining in cost rapidly. Lithium-ion batteries create an electric current by moving lithium cations from the battery’s anode to the cathode. When the battery recharges, the lithium cations return to the anode.


Commonly used for electric cars, laptops, and cell phones, lithium-ion batteries can also supply large-scale power grids. Racks of batteries are stored beside a monitoring system within a compact unit. These units are remarkably efficient, storing vast amounts of energy and leaving a minuscule footprint.


Lithium-ion batteries are fast and reliable. Crucially, they are reversible: they can both store and release energy. Additionally, storage and release can occur in fractions of a second. The speed of lithium-ion batteries is especially useful in emergencies. A disruption in the power grid in cases of natural disasters (think ice storms in Texas), computer disruptions, or human error, can easily and quickly be remedied with energy stored by lithium-ion batteries. The affordability of these batteries, however, means that they are advantageous for regular grid operation and not just as emergency backups.


Lithium-ion batteries are already slated to replace aspects of the modern power grid based solely on efficiency. The current power grid generates power when it is cheapest and then releases the power throughout the day as it is needed. However, when the demand for electricity is too high for the regular system to support, peaker plants supplement the needed electricity. Peaker plants house large, speedy natural-gas generators which typically run for only a few hours each month. Thus, the energy they produce is not only the priciest but the dirtiest on the power grid— for every one unit of energy, peaker plants emit up to twice as much CO2 as normal power facilities. CO2, a leading culprit in climate change, air pollution, and acid rain, is detrimental to environmental and human health. Lithium-ion batteries provide a viable alternative solution to peaker plants. During costly, high-demand periods, efficient, inexpensive lithium-ion batteries can supplement power (peak shaving) or totally meet the high demand (peak leveling).


Already, lithium-ion batteries have proven to be significant competitors against costly, CO2-spewing peaker plants. For instance, Tesla, known for its lithium-ion battery-powered cars, constructed a 100 megawatt (MW) lithium-ion battery, known as the Hornsdale Power Reserve, to store energy in South Australia. (100 MW can fuel about 75,000 homes per year.) In just 140 milliseconds, the battery can go from off to full capacity. After only one year, the Hornsdale Power Reserve saved nearly $40 million. Its tremendous success led Tesla to expand the battery’s capacity to 150 MW. Tesla also has plans to build another Australian battery, this time with a 300 MW capacity. Additionally, Tesla has developed a residential lithium-ion battery to store excess energy captured from home solar panels.


Lithium-ion batteries do have disadvantages. They can overheat and even catch on fire in extreme circumstances. Additionally, lithium-ion batteries lose capacity and frequency over time from repeated charging. After about 2-3 years, they require complete replacement. However, their energy density is almost unparalleled and makes them an ideal choice for energy storage.


The lithium-ion storage market has seen significant growth in the past decade. Between 2013 and 2018, global sales of lithium-ion batteries doubled. In 2019, the lithium-ion storage market was worth $36.7 billion; experts project that number will rise to $129.3 billion by 2027.

Anticipated lithium-ion energy storage in all markets.


Flow Batteries


Another promising battery is the flow battery. Flow batteries consist of two tanks, one positive and one negative. Ions are exchanged through a membrane connected to the two tanks; this process creates electric current.


While lithium-ion batteries are preferred for electronic devices and electric vehicles, flow batteries are suitable for stationary, large-scale functions. Although lithium-ion batteries are less costly and more energy dense than flow batteries, flow batteries have a much longer lifespan. Flow batteries last for about 30 years, 10-15 times as long as lithium-ion batteries. Over time, the large initial investment in a long-lasting flow battery pays off. The parts of a flow battery can be individually replaced, while a lithium-ion battery must be totally replaced when it ages. Additionally, flow batteries can operate in a wider variety of climates and are less susceptible to starting on fire. Finally, flow batteries can easily be scaled up. Therefore, flow batteries are especially suited for large-scale, long-term energy storage: the initial cost of flow batteries pays off in the long run.


While many flow batteries use expensive metals, such as vanadium, researchers are developing less costly flow batteries. USC scientists utilize iron sulfate, a cheap waste material from mining processes, for their novel flow battery, which could last for up to 25 years. Other researchers are exploring sulfur, manganese, and zinc-bromide flow batteries.


The market for flow batteries, worth $130.4 million in 2018, is expected to grow. Demand for lithium-ion batteries, widely used for electric vehicles and personal electronics, will likely cause lithium prices to increase. Innovative flow batteries using inexpensive materials will be viable competitors. Additionally, flow batteries are more easily recyclable than lithium-ion batteries, giving them an environmental advantage. Consequently, experts project that the flow battery market will grow, reaching $403.0 million in 2026.

Projected flow battery usage for energy storage, charging, and distribution.


Thermal Energy Storage


Thermal Energy Storage (TES) is another method of caching energy. TES stores heat rather than electricity. Both the sun and the earth release heat, and waste heat is a byproduct of industrial and other processes. Rather than losing this heat, TES allows it to be captured and stored. Eventually, the heat is released to supply energy (to thermovoltaic panels, for instance).


There are three major methods to store thermal energy: sensible heat storage, latent heat storage, and thermo-chemical storage. In sensible heat storage, heat is stored by raising the temperature of a solid or liquid with high heat capacity and a high boiling point. (Molten salts are one commonly used substance.) When the heat is released for use, the solid or liquid correspondingly drops in temperature. Sensible heat storage is commonly used for Concentrated Solar Power. Although this heat storage technique is less efficient than the other two TES methods, its low cost and straightforwardness make it the most widely-used method.


Latent heat storage harnesses thermal energy to convert a solid to a liquid. This phase change requires considerable energy. Conversely, reversing the phase change releases this heat energy. Latent heat storage is much more compact than sensible heat storage due to the high enthalpy of fusion (heat required for melting).


Thermo-chemical storage is the most efficient and storage-dense of all thermal energy storage methods. In thermo-chemical storage, heat is an input into a chemical reaction (an endothermic reaction). The input energy is then stored within the bonds that hold molecules together. When these bonds are later broken and the reaction is reversed, the heat is then released (an exothermic reaction).


TES has numerous applications; it is especially useful in business and heavy industrial uses because it captures waste heat and allows it to be reused to supply more energy. Efficient and relatively inexpensive, TES is expected to grow in the coming years. In 2019, the TES market was valued at $4.204 billion; by 2025, it is projected to grow to $8.466 billion.

Projected TES usage by region. The Asian-Pacific region is particularly promising due to growing demand for air-conditioning as well as government incentives for clean energy development.


Pumped-Storage Hydropower


Most widespread of all energy storage systems—95% of energy storage in the US—are pumped hydroelectric facilities, which consist of two reservoirs at different heights. When demand for electricity is lower, electrically-powered turbines pump water from the lower to the higher reservoir. In the process, the input energy is converted to potential energy. At peak-demand hours, the water is released, and energy is harnessed. (Check out our recent article on hydropower here.)


Pumped-storage hydropower is able to store vast amounts of energy. Currently, pumped hydroelectric facilities account for 22 gigawatts—88%—of all US energy storage. However, the large scale of these facilities has disadvantages as well. Large water reservoirs cannot easily be constructed in densely populated areas, where the demand for electricity is highest, and therefore have less opportunity for expansion.


Pumped-storage hydropower ultimately operates at a net loss of electricity: more electricity is consumed in moving the water uphill than produced in releasing the water. For instance, US pumped storage plants consumed a total of 29 billion kilowatt-hours (kWh) in 2011 but produced only 23 billion kWh. This loss of energy, however, ultimately makes the energy grid more reliable through load shifting–energy is used when demand is lowest so it can be released at peak-demand times.

Pumped-storage hydropower consumes more electricity than it produces but increases cost-effectiveness and grid reliability.


A new variety of pumped-hydro storage could offer even greater flexibility.  Underground pumped-hydro storage facilities, like their surface-level cousins, pump water from a lower to a higher reservoir and then release the water when electricity is needed. Located beneath the earth, however, underground pumped-hydro facilities do not rely on topographical features, can be placed closer to population centers, and are less likely to disrupt ecosystems.


Although no large-scale underground pumped-hydro storage facilities exist, they show tremendous potential. Existing hollows in the earth, including former mines, are promising locations. Downsides to this burgeoning energy storage method include a high initial investment and lengthy construction times. Additionally, the physical movement and stress of rocks could cause difficulties.


Water, Flywheels… Even Bitcoin


Other forms of energy storage also utilize water. Researchers are developing systems to pressurize water in underground cisterns. Electric energy is used to pump water underground. The water is eventually released to power a motor and create electricity.


Another energy storage method uses electricity or solar power to break apart water, H2O, into its constituent hydrogen and oxygen gases. Hydrogen gas is a valuable fuel that is totally clean. Alternatively, the hydrogen produced from the breakdown of water can be used in battery cells.


Flywheels are yet another technology to meet the growing demand for energy storage. Flywheels convert electric energy to mechanical energy (energy of motion): electricity is used to spin a nearly frictionless rotor. When this energy is eventually needed for consumption, the rotor slows down as mechanical energy is then converted back to electricity.


Flywheels are extremely efficient, have almost no negative environmental impact, can operate for long stretches of time, and can go from zero to full charge in just seconds. They can even recover energy that would otherwise be lost. For instance, they can capture braking energy from electric trains. Flywheels are especially useful for stabilizing the energy levels on wind farms and as backup energy sources at manufacturing plants.


Interestingly, Bitcoin can be considered a method of energy storage. (Read our most recent article on Bitcoin here.) Bitcoin mining is notoriously energy consumptive. In the past year alone, Bitcoin mining has consumed about 14.84 gigawatts of power (the equivalent of nearly 47 million photovoltaic panels). Bitcoin advocates argue, however, that Bitcoin can actually “store” energy by using excess renewable energy from remote locations to mine Bitcoins. Transporting electricity is costly and inefficient, so rather than letting energy from isolated places go to waste, mining can convert this excess energy into coins.


Investing Opportunities


The transition to renewable energy is accelerating. Congress and President Biden consider the climate an urgent issue. The White House recently proposed plans to promote clean energy investment and development. Congress will continue the clean energy momentum with climate change legislation, and several states, including New York, California, and Massachusetts, have revealed clean energy initiatives.


Crucial to the success of these policy efforts are energy storage systems. The US Energy Storage Association projects that the US will install 100 gigawatts of new energy storage by 2030. In 2020 alone, a record-breaking 1.2 gigawatts of new energy storage were installed in the US. This figure will grow to almost 7.5 gigawatts in 2025.


COVID-19 lockdowns have especially accelerated the demand for energy storage. As the pandemic forced many to work, learn, and socialize from home, awareness of our dependence on electricity rose. Meanwhile, major storms, natural disasters, and disruptions in the power grid reminded us that the present energy grid is not always reliable. The demand for home energy storage systems is therefore rising. In just four years, Wood Mackenzie projects, the residential energy storage sector will be six times larger.


Energy storage investors will also benefit from federal incentives. The US government has enacted an investment tax credit (ITC) and the Modified Accelerated Cost Recovery System (MACRS) for privately owned energy storage systems. Individuals and businesses with personal or commercial solar panels and energy storage systems may benefit from these incentives, which will fuel the demand for more energy storage.


As the world shifts to renewable energy, investing opportunities in energy storage will continue to grow. The ALPS Clean Energy ETF (ACES), mentioned in previous posts, is our favorite renewable energy fund. With its exposure to energy storage and fuel cells as well as smart grid and residential energy optimization technologies, ACES is a diversified, innovative fund that will help you to contribute to the renewables revolution.

To learn more about how you can invest with purpose in energy storage, contact Servant Financial today.