Venture capital and commercial horticulture projects — development risk, stakeholder engagement and progress towards a sustainable food future

Where there is challenge, there is opportunity — and where there is change, there are projects. Enter sustainable investors Oasthouse Ventures and their innovative commercial horticulture development projects which are stacked high with benefits; and betting on successful outcomes.

We need to produce more food with fewer resources. Recent estimates call a global population peak just shy of 9 billion by 2040 and that food consumption will rise by more than 50% by 2050. Here in the UK, Covid, war and climate change have led us to look anew at our food security strategy. Food security is national security, and supply shocks need to be mitigated by producing more domestically.

Such growth is welcome by the UK commercial horticulture sector, but how will it meet demand sustainably and secure competitive advantage in what remains a global food market? These are the challenges Oasthouse Ventures’ projects are rising to.

Oasthouse Ventures was founded by Andy Allen and partners in 2010 with a commitment to sustainable development. Andy has since established low-carbon businesses with a combined project development value of £750 million.

“Oasthouse has key expertise in renewable energy and it is the intersection of energy with food production that brought Oasthouse to low-carbon farming” explains Andy. Due to significant heat and lighting requirements, the cost of energy dominates the economics of controlled environment horticulture. Meeting demand with low-carbon and secure energy supplies is therefore the key to unlocking investment value.

Exploring Oasthouse’s project development path to date, I came to be staring into a very large hole in a former RAF airfield in Essex. The hole was filling up fast, with construction of a 595 thousand tonne capacity integrated waste management facility. This is the industrial-project-next-door to which Oasthouse seeks to co-locate £150 million of low-carbon glasshouses.

Known as The Rivenhall Project, this proposes to deliver a 100 acre horticultural production facility, 500 local jobs, £300 million into the local economy; and provide an operational blueprint for the future of sustainable waste and food systems.

“The waste facility can provide the secure long-term supply of low-carbon energy and CO² we need to drive value at Rivenhall,” explains Business Development Manager, Ed Moorhouse. “It’s a circular economy model, using waste as a resource to meet both environmental and food security objectives."

The Rivenhall Project will follow Oasthouse Venture’s successful delivery of 70 acres of energy-efficient glasshouses in East Anglia, completed in 2019. Here, in a series of firsts, Oasthouse utilised the largest heat-pump deployed in the UK to deliver the world’s first glasshouses fuelled by waste heat from a water treatment facility. This model provides 90% of heat required by the glasshouses, reducing energy costs by more than 40% and carbon emissions by 75%. Presenting a compelling project business case and the ESG profile investors were seeking, Oasthouse secured a £120 million investment from Schroders Greencoat — the first institutional investment in a commercial horticulture project the UK had ever seen.

The East Anglia Project is now in its fourth operational year, with waste heat continuing to drive operational profits and effectively extend the growing season to displace imports. But further to this phenomenal success, the commercial glasshouse development path has been far from certain for Oasthouse. It’s a lesson in project risk, largely predicated on the vagaries of UK planning regulation and government incentives.

The UK’s Renewable Heat Incentive (RHI) has enabled many pioneer capital-intensive energy projects and had the single biggest positive impact on the commercial horticulture sector in recent years in respect of energy use.

“The RHI was absolutely critical to reducing risk for investors in The East Anglia Project,” confirms Andy. The long horizon of this mechanism was particularly important, boosting operational income up to 30-40% with inflation proof tariff guarantees over a 20-year project lifecycle.

Such success set the stage for a second low carbon glasshouse project, this time a £60 million, 38-acre site proposed in Wrexham that promised 200 jobs and to grow 40% of the tomatoes consumed in Wales. But whilst the project business model was replicated, the straightforward planning application process experienced in East Anglia was not.

The RHI scheme was drawing to a close, so Oasthouse submitted a time-sensitive planning application. Wrexham Council prevaricated, then refused. The Welsh Government overturned the decision on appeal, but it was too late — the critical RHI deadline had passed.

With the project no longer viable, Oasthouse declared The Wrexham Project benefits had been “consigned to the scrap heap, due to mishandling of the planning application by the Wrexham council planning department."

Until such time regulation prioritises glasshouse developments in national planning policy, such local planning risk remains. But Oasthouse’s appetite for low-carbon glasshouse projects remains strong. In fact, The Rivenhall Project is their most ambitious development yet.

Back on site in Essex, Ed Moorhouse talks about the stakeholder engagement behind their long-term vision, built around a 40 year project life-cycle. He is working hard to communicate the local benefits.

“We have the opportunity to do something quite special here with bio-diversity net gain,” he explains. “Our approach to landscape design keeps public access in mind — more footpaths, more bridleways; we want Rivenhall to be an asset to the local community.” Demonstrating the project’s investment in skills and job creation is just as important, with a free onsite childcare facility planned to attract and retain workers.

This is a management ‘for’ stakeholder approach, which underpins all successful, sustainable developments. It’s too early to say if this will pay dividends for The Rivenhall Project specifically, but let’s hope Oasthouse Ventures’ success to date is a bellwether for a sustainable and secure food future. That those in the business of high risk and high returns are betting on it is a good sign.

With an emphasis on effective stakeholder engagement, good project management can certainly help to beat the odds.