The industry’s “emperor’s new clothes” delusion may kill the viable projects desperately needed by the industry says Senior Business and Project Consultant at Pisco, Kristine Albrechtsen.
We at Pisco, an independent aquaculture consultancy, fear that viable and realistic land-based salmon projects may never materialize, as they are continually benchmarked against projects built on overoptimistic production and economic expectations. These expectations have never been achieved in operational facilities.
This article draws only on publicly available data from both established and planned land-based sites.
Our insights are based on multiple technical feasibility studies, technical due diligence projects, and ongoing dialogue with land-based salmon growers around the world. While confidential insights are not included here, they support the conclusions we present.
Our concerns are many, but in this article we highlight two in particular:
1. A production index above 135 kg/m³/year is biologically unfeasible
Technology cannot override biology. No salmon grow-out operation, regardless of technology, has consistently achieved a PI above 150 kg harvest/m³ of rearing volume per year. A PI of 135 kg/m³/year should be treated as a realistic biological limit for planning purposes.
2. Facilities are not in ramp-up if they have reached steady state at the biological limit
A salmon grow-out facility should reach its potential production capacity within 24 months. Longer ramp-up periods reflect denial of reality or failure to admit that the initial targets were unrealistic.
As a Danish company, it is natural for Pisco to leverage the universal and ever relevant learnings from the fairytale “The emperor’s new clothes”, written by Danish author H.C. Andersen. While encouraging all to read the fairytale, it is shortly recapped here:
- A vain emperor obsessed with fashion hired two swindlers, who claimed to weave invisible clothes. The swindlers claimed that the clothes were visible only to the wise and competent. Thereby, the swindlers tricked everyone into pretending that they could see the invisible clothes.
- As the emperor paraded through the town in his “new clothes,” no one dared admit that they could not see the clothes.
- A small innocent child saw the truth and shouted, “the emperor is wearing nothing at all”, making it possible for everyone else to admit to the truth.
- The fable reveals the dangers of vanity, pride, and collective denial in the face of truth.
The land-based salmon growout industry is having an “Emperor’s new clothes” moment. With many claiming they can do better, than the industry has been able to achieve – well – they are basically selling invisible clothes.
A very important disclaimer is required in our fairytale adaptation, to emphasize the significant difference between HCA’s story and the tale of land-based salmon growout development. The swindlers in the salmon fairytale are not actual swindlers. They are in most cases ambitious hardworking professionals, from a very successful industry, eager to innovate, develop and utilize new technologies. They have a sincere aim of optimizing the industry, protecting the environment and producing more protein for a growing population in a sustainable way. In short, they are first movers, forced to accept considerable risks, obviously with potential for equally huge rewards.
That said, let’s start the story in 2015, when some of the first movers were starting up production in the first land-based growout facilities, and a large portfolio of projects were in the pipeline.
Forecasted economic performance (investment costs, production costs and revenues) all starts with biological assumptions, which result in operational and technical plans. Changed biological assumptions have huge cascading effects on planned and realized economic performance. In 2015, in lack of experience from land-based salmon growout facilities, the biological assumptions were specified based on experience from salmon growout farming in net pens and from land-based smolt production facilities. Whereas the swindlers from HCA’s fable knew they were tricking the emperor, the project developers in 2015 used the knowledge and experience available at the time. And like most other first movers, they made some faulty assumptions, due to lack of knowledge and experience. That was understandable in 2015.
Today, when operational realized data from several land-based salmon growout facilities are available, these can and should be used as base assumptions for realistic project plans.
Let’s dig into analysis of realized data, verifying the two observations regarding Production Index and Ramp up. Get ready to face the truth!
Production Index (PI)
The Production Index describes the annual production (kg per year) in the growout tank volume (m3) The figure can be used to evaluate and compare operations and planned projects utilizing different technologies but producing the same species of roughly the same target harvest size. PI is a benchmark figure, impacted by – but not to be confused with density. However, the max density for large salmon has previously, among other assumptions, been assumed much higher than what has been demonstrated optimal.
Figure 1 below shows the development of the planned PI for several land-based salmon growout projects, that achieved financing and were built (year of first harvest given as date). While there is a large variety between the projects, the average planned PI has gradually been reduced from well above 200 kg/m3/year in 2015 to approximately 150 kg/m3/year in 2024. The orange datapoints show projects still under development, they all have a planned production index below 150 kg/m3/year. It is noted that there are many projects still planning with a production index well above 150 kg/ m3/ year, which is highlighted by the green datapoint that depicts a facility already under construction with a PI of 184 kg/ m3/ year.
A realistic PI in 2025 reflects what other operational facilities have been able to achieve. PI values from four operational companies have been analyzed and are shown in figure 2.
Facility 2 and 4 shows comparable ramp-up in the first couple of years, whilst facility 1 is somewhat slower. 1 and 2 seems to have reached peak production, whilst Facility 4 has a trajectory towards a PI of 125-135 within a few years. Facility 3 has considerably slower ramp up than the others and has likely not hit full production yet. This facility is also likely to hit about 130 kg/ m3/ year in two years’ time. It should be noted that facility 2 differs considerably from the other facilities and therefore is able to reach a slightly higher PI’s.
The development at Facility 3 is almost identical to facility 1 in the first two years, but then faced operational challenges, after which they “restarted” their ramp up. It should be noted that the tendency shown in the diagrams is supported by several other data sets, not included.
It has also been noted that the data for both RAS and Hybrid flowthrough facilities are similar. This demonstrates that the fish do not care about technology. Growth suppression will kick in at a certain density, regardless of technology.
Some existing and future projects have looked at previous experience and have adjusted their production targets accordingly. However, they are continuously being benchmarked against less realistic peers in the market. Everyone is competing for the right funding, so without insight, it is easy to get misled.
Conclusion number 1: Based on experience from realized operations, considering current genetics, a realistic PI for planning of salmon growout operations is 135 kg/ m3/ year, which should be considered a biological limit for traditional tank-based systems.
Eternal Ramp Up
Ramp up describes the period where production, biomass, and harvests are gradually increased from first insert to the steady state production capacity of the facility. The term “ramp up” indicates that the production performance is still in a planned development and output is expected to increase.
Recognizing the usual predictable and unpredictable start up challenges, the approximate growout production cycle time of 1 year, and the implementation time of individual operational production plans, it is in theory possible to achieve steady state in 2 years from first insert. Normally the observed ramp up period is somewhat longer and takes from 3 to 4 years from first harvest.
However, if the planned production capacity target (here reflected by the planned PI) is unrealistically high, the realized production will stagnate and flatline below the planned target.
In this situation, visualized in figure 3, some companies claim they are still in ramp up, thereby indicating they still expect to reach the planned PI. A prolonged ramp up period can be justified, if they have not yet reached the biological limit and if production is still developing. Facility 3 in figure 2 is a good example of this.
However, if a company has already achieved stable steady state production at or close to the biological limit, the company will keep delivering disappointing results, until they downscale the rated production capacity. This step has already been taken by several of the first movers over the past couple of years. There are however many who maintain the original elevated PI expectations and therefore will continue to fail to reach business objectives. If they have reached the limit, they are bound to be in “eternal ramp up”.
Conclusion number 2: If production has reached a steady state at the max biological limit, the facility is not in ramp up but has achieved its full potential.
Final Thoughts
The observations and conclusions included in this article reflect consolidation of underlying biological and operational assumptions and realized data, such as genetics, temperature, densities, fish logistics and harvest size. Many incremental steps addressing these sub elements can be developed, elaborated and discussed in further detail. However, the consolidated production data, most importantly how much operational farmers have produced in a given rearing volume (PI) is given. This is directly linked to biology, not technology.
Therefore, as in H.C. Andersen’s fairytale, it is on all of us to leverage the realized experience from the established and operational farms, and acknowledge that at present, a realistic Production Index is below 150 kg/ m3/ year and more likely around 135 kg/ m3/ year. We do not need more projects with PI’s of 160-200 kg/ m3/ year – they are still out there looking for funding.
Only by doing so, can we avoid choosing the unrealistic projects and killing viable projects with realistic assumptions. The industry needs sound projects and not prestige projects without the means to meet production targets. If not, we will keep scaring investors and delay the inevitable development of the land-based industry.
