Energy has been a hot topic for greenhouse growers in recent years—but at Village Farms, it became a priority over a decade ago when the company established its subsidiary, VF Clean Energy. This initiative converted landfill gas into clean energy, providing electricity for BC Hydro. This aligns with the company's values, particularly its commitment to environmental stewardship and sustainable innovation, which are at the core of Village Farms' identity and vision. As the energy market evolved, Village Farms transitioned to a renewable natural gas (RNG) model, reflecting its commitment to reducing its environmental footprint while addressing resource efficiency in food and cannabis production. Michael DeGiglio, President and CEO, explains how the company balances energy innovation with agricultural production in a rapidly changing energy market.
Village Farms Clean Energy and Village Farms' Fresh produce segment operate under wholly owned subsidiaries of Village Farms International, the latter being one of the largest growers, marketers, and distributors of premium-quality, greenhouse-grown fruits and vegetables in North America. Their operations also include Pure Sunfarms, one of Canada's largest cannabis growers.
"Our commitment to clean energy has helped distinguish Village Farms International in both the produce and cannabis sectors," says Michael. "By investing in VF Clean Energy ten years ago, we not only lowered our carbon footprint but also strengthened our market position as a leader in sustainable agriculture. This approach helps meet the increasing demand for eco-conscious products, appealing to consumers who value transparency and responsibility in food production."
Right: Michael DeGiglio>
Shifting energy landscape
The clean energy initiative highlights the company's broader goals of operational efficiency and environmental stewardship—but the energy landscape has shifted significantly in recent years, bringing both challenges and opportunities to agricultural and energy companies.
Despite the relative stability of the energy market in British Columbia (BC) due to regulated electricity and natural gas services, Village Farms International (VFI) has observed shifts in how energy impacts its operations and cost structure, especially as the company diversifies into renewable energy initiatives.
The BC energy market has a unique structure. The province's electricity market is regulated, with BC Hydro as the primary utility provider and Fortis as the main supplier of natural gas. While these utilities offer stability and minimize price volatility, deregulation of natural gas transportation provides some flexibility. However, this has minimal impact on VF's overall energy costs, explains Jonathan Bos, VP of Asset Development.
"The stable but rising costs of electricity, along with fluctuating natural gas prices, have required VFI to take a proactive approach to energy management across its operations. Because energy is one of the top three cost drivers in produce and cannabis production, we responded with a continuous improvement model, aiming to optimize efficiency wherever possible. The cost pressures in these commodity markets make efficiency essential for keeping production costs low and maintaining competitive margins," Jonathan explains.
Jonathan Bos
Impact of energy prices on produce production
BC's electricity, over 90% green, is generally stable throughout the year and minimally impacted by carbon taxation. However, electricity prices have experienced incremental annual increases. In contrast, natural gas prices are more volatile, influenced by seasonal demands and regional pricing variations.
"For example, natural gas transported through BC's Sumas City Gate often trades at a premium compared to other regions," Jonathan says. "This volatility in natural gas prices means that we must be especially vigilant in monitoring and adjusting our energy usage." Energy efficiency, therefore, has not only become a priority due to VFI's sustainability efforts but also because of its impact on production costs. "In produce and cannabis production, energy efficiency efforts span several operational aspects, from water usage and automation to transportation and labor optimization. Each of these factors contributes to lowering production costs and reinforcing our commitment to sustainability."
Innovations in renewable natural gas: The Delta RNG project
The Delta Renewable Natural Gas (RNG) project represents an evolution in Village Farms Clean Energy's strategy. Initially, VFCE focused on a landfill gas (LFG)-to-electricity model, which became unsustainable over time. In response, VFCE transitioned to an RNG model, signing a 25-year LFG rights extension agreement with the City of Vancouver, partnering with Atlanta-based Terreva Renewables, which also has an RNG offtake contract with Fortis. The Delta RNG plant developed by Terreva Renewables uses advanced membrane technology for gas upgrading, efficiently converting LFG to RNG.
This shift was enabled by regulatory changes, such as the approval of a retail RNG tariff by the Public Utilities Commission, which allowed Fortis to issue Requests for Proposals for RNG production. Jonathan explained, "This setup offers a sustainable, long-term solution with accretive financial returns due to the fixed-price offtake agreement."
Potential of RNG
Looking forward, the RNG market presents significant yet uncertain opportunities for VFI. "The current high carbon tax on regular natural gas elevates RNG as a viable alternative. However, RNG pricing remains high, placing it outside our immediate operational scope," Jonathan explains. "The exclusive offtake agreement with Fortis for Delta RNG's production reinforces our focus on partnering for reliable returns, even though it means we cannot directly use RNG within our own operations."
Nonetheless, according to Jonathan, "The market dynamics surrounding RNG could evolve, especially as governments introduce further incentives and carbon policies. As RNG technology advances and production costs potentially decrease, VFI could find new ways to leverage RNG within its operations, strengthening its position at the intersection of agriculture and renewable energy."
Distinguishing clean energy leadership
The clean energy initiatives highlight the company's broader goals of operational efficiency and environmental stewardship. "Our commitment to clean energy has helped distinguish Village Farms International in both the produce and cannabis sectors," Michael said.
Investing in supplemental lighting to use more electricity internally is a significant consideration for VFI's produce production, particularly when aiming to extend growing seasons and ensure year-round supply. Currently, VFI uses supplemental lighting extensively in its cannabis operations, essential for producing high-quality products consistently. In produce, VFI has supplemental lighting in only one of its Texas facilities, relying on the company's geographically distributed facilities—spanning Vancouver, Texas, and partnerships with third-party growers—to meet year-round demand.
Michael explains, "Investing in supplemental lighting for produce could offer year-round production at the Vancouver site but requires substantial capital investment and medium-voltage electrical upgrades through BC Hydro. These upgrades are costly and time-intensive, often taking one to two years or more, making them a complex proposition. Consequently, lighting investments are evaluated on a multi-year basis, with financial viability closely examined for each specific crop and location."
Navigating complex landscapes
Throughout the years, Village Farms has strategically positioned itself to navigate a complex energy and agricultural landscape, leveraging partnerships, continuous improvements, and renewable energy innovations. "Through projects like Delta RNG, we demonstrated an ability to adapt to shifting market dynamics while keeping sustainability at the forefront of our operations. While energy market changes in BC may limit competitive options, our proactive approach to efficiency and partnerships enables us to stay resilient and forward-looking in an increasingly sustainable and competitive marketplace."
For more information:
Helen L. Aquino
Village Farms International Inc.
Tel.: +1 (407) 936-1190
www.villagefarms.com
www.villagefarmsfresh.com