Village Farms International Inc. has long prioritized sustainability, exemplified through the establishment of VF Clean Energy subsidiary a decade ago. This initiative converts landfill gas into clean energy, providing electricity for the city of Vancouver. 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. The clean energy initiative reinforces the company’s dedication to reducing its environmental impact, while also supporting the company’s strategic aim of enhancing food production and resource efficiency.

By investing in VF Clean Energy, Village Farms International Inc. not only lowered its carbon footprint but also strengthened its 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.

“Our commitment to clean energy has helped distinguish Village Farms International Inc. in both the produce and cannabis sectors, emphasizing its mission to act as a responsible steward of the planet while delivering high-quality products to consumers,” Michael DeGiglio, President, CEO, & Founder of Village Farms International Inc. told us.

The company’s sustainability efforts are highlighted across multiple sectors, including Village Farms Greenhouse Grown and Pure Sunfarms, illustrating a consistent, long-term commitment to environmental health and operational efficiency, which remains central to their competitive advantage and appeal to eco-conscious consumers. The energy landscape has shifted significantly in recent years, bringing both challenges and opportunities to agricultural and energy companies like Village Farms International (VFI) and its affiliate, Village Farms Clean Energy (VFCE). Despite the relative stability of the energy market in British Columbia (BC) due to regulated electricity and natural gas services, VFI has seen shifts in how energy impacts its operations and cost structure, especially as the company diversifies into renewable energy initiatives. Here’s an exploration of these developments:

1. A Shifting Energy Market: How it Affects Village Farms

In BC, the 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 a minimal impact on VF’s overall energy costs.

According to Jonathan Bos, VP of Asset Development for Village Farms International Inc, “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, VFI has 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.”

2. Impact of Energy Prices on Produce Production

Energy efficiency has become a priority due to its impact on production costs. 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,” Bos told us.

This volatility in natural gas prices means that VFI must be especially vigilant in monitoring and adjusting its energy usage. 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 VFI’s commitment to sustainability.

3. Innovations in Renewable Natural Gas: The Delta RNG Project

The Delta Renewable Natural Gas (RNG) project represents an evolution in VFCE’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 agreement with the City of Vancouver, partnering with Atlanta-based Terreva Renewables and its RNG offtake contract with Fortis. This shift was possible following regulatory changes, such as the approval of a retail RNG tariff by the Public Utilities Commission, which enabled Fortis to issue Requests for Proposals for RNG production.

The Delta RNG plant developed by Terreva uses advanced membrane technology for gas upgrading, efficiently converting LFG to RNG.

Bos commented, “This setup offers a sustainable, long-term solution with accretive financial returns due to the fixed price offtake agreement.” The project is a testament to VFI’s commitment to reducing its environmental footprint and aligns with the company’s broader strategic goals of integrating renewable energy solutions into its operations.

4. Energy Efficiency Across VFI’s Greenhouse and Clean Energy Operations

Energy efficiency is a core principle across VFI’s various operations. In the greenhouse division, Village Farms Greenhouse Grown continually seeks improvements in automation, water and energy use, and labor efficiency. By adopting these practices, VFI reduces its overall environmental impact and optimizes operational costs.

Similarly, the Delta RNG facility was designed with best-in-class commercial and economic equipment, making it a long-term, viable project. VFI’s commitment to energy efficiency ensures that both greenhouse and energy operations remain cost-effective, supporting the company’s goals of sustainable and profitable growth.

5. Exploring Future Opportunities in the RNG Market

Looking forward, the RNG market presents significant, yet still 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 VFI’s immediate operational scope. The exclusive offtake agreement with Fortis for Delta RNG’s production reinforces VFI’s focus on partnering for reliable returns, even though it means VF cannot directly use RNG within its own operations.

Nonetheless according to Bos, “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.”

6. The Potential of Supplemental Lighting in Produce Production

Lighting 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 TX facilities, relying  on the company’s  geographically distributed facilities, spanning Vancouver, Texas, and partnerships with third-party growers, to meet year-round demand.

DeGiglio told us, “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.”

Conclusion

Village Farms International Inc. 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, VFI has demonstrated an ability to adapt to shifting market dynamics while keeping sustainability at the forefront of its operations. While energy market changes in BC may limit competitive options, VFI’s proactive approach to efficiency and partnerships enables the company to stay resilient and forward-looking in an increasingly sustainable and competitive marketplace.

About Village Farms Greenhouse Grown Village Farms Greenhouse Grown, a wholly owned subsidiary of Village Farms International, Inc. (Nasdaq: VFF), is one of the largest growers, marketers, and distributors of premium-quality, greenhouse-grown fruits, and vegetables in North America. The food the company’s farmers grow is harvested by hand from environmentally friendly, soil-less, glass greenhouses daily while utilizing the highest level of food safety standards available. The Village Farms Greenhouse Grown® brand of fruits and vegetables are marketed and distributed primarily to local retail grocers and dedicated fresh food distributors throughout the United States and Canada. Since its inception, Village Farms Greenhouse Grown has been guided by sustainability principles that enable the company to grow food 365 days a year that not only feeds the growing population but is healthier for people and the planet. Village Farms Greenhouse Grown is Good for the Earth® and good for you. Good for the Earth® and Garden Fresh Flavor® are not only taglines for the company but the value proposition Village Farms Greenhouse Grown lives by.  And this is why it Takes a Village® to deliver on this promise.

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