As more states legalize commercial cannabis production, options like solar power become more important for the industry
Cannabis growers need to weigh myriad business decisions in order to be competitive. But reducing high energy costs and countering the negative environmental consequences of producing a power-hungry crop should be among their top priorities.
Sustainable cultivation practices are often touted as a marketing advantage, in addition to the environmental benefits and potential to reduce operating expenses.
And the evidence is more than just anecdotal, according to Consumer Research Around Cannabis.
Based on a survey the research firm conducted in Los Angeles, 50% of consumers who have bought cannabis in the past year buy “green/good for the environment” regularly. Cannabis users are 31% more likely than the market average to regularly buy “green,” according to Consumer Research Around Cannabis.
To learn more about the research firm’s insights, visit consumerresearcharoundcannabis.com.
While outdoor cultivation is an option in warmer climates, indoor cultivation allows for more control over the product, higher yields and multiple harvests. Given the economics — and the climate in many of the new states legalizing recreational marijuana, such as Massachusetts — many growers expanding operations or opening new facilities will opt for indoor cultivation.
But the major downside of indoor cultivation is that it is extremely energy intensive. Lighting is the largest energy draw for grow facilities, requiring illumination levels that are the equivalent of hospital operating rooms. Indoor facilities also require sophisticated and energy-intensive HVAC systems, as indoor growing facilities require 30 hourly air exchanges — six times the rate of a high-tech laboratory. The HVAC system needs to carefully manage temperature, humidity and CO2 levels, all of which require extra energy to maintain the proper balances.
The amount of power needed at an indoor grow facility is on par with data server facilities, which are between 50 and 200 times more energy-intense than a typical office building. Because of that, indoor cannabis cultivation is thought to be the most energy-intensive agricultural business in the world.
High energy consumption translates into high environmental costs. Cannabis operations can have a huge carbon footprint. According to Evan Mills, the scientist who authored a 2011 study on the carbon footprint of cannabis production, one kilogram of marijuana results in 4,600 kilograms of CO2 in the atmosphere — the equivalent of driving across the United States 11 times in a car that gets 44 miles per gallon. And as cannabis production continues to grow, the environmental impacts will rapidly multiply.
To quote law professor Gina Warren, from her report in the Columbia Journal of Environmental Law, “the weed is legal but the herb ain’t green.”
Mitigating Power Consumption
The high-intensity energy usage puts a strain on public utilities. For example, in 2015, Pacific Power in Portland, Oregon, reported seven outages due to cannabis production facilities, according to The Guardian. Portland General Electric had similar problems.
Local and state regulators are taking a hard look at the energy impact of cannabis. Boulder County, Colorado requires growers to offset their energy usage with renewable sources or pay a fee of 2.16 cents per kilowatt-hour. California has drafted regulations requiring indoor growers to acquire 42% of their energy from renewable sources. Oregon requires indoor cultivators applying for a license to estimate electricity and water usage using a state-provided online calculator, hoping the process will spur growers to seek out energy efficiencies and renewable options.
In Massachusetts, there is discussion about renewable energy and energy efficiency mandates for cannabis growers, but the details have not yet been finalized. The potential for mandates and surcharges means that growers need to be thinking about how to integrate clean energy and energy efficiency solutions into their business plan. The good news is that they deliver a positive impact to the bottom line.
For indoor growers, energy efficiency is a critical first step. Public utilities are adapting their education programs for the cannabis industry, giving growers a resource to learn more about new technologies and approaches, including ways to save energy on climate control, air filtration or LED and other high efficiency lighting.
Funded by the U.S. Department of Energy, North Carolina State University operates the Database of State Incentives for Renewables & Efficiency (DSIRE), a national archive of energy efficiency and renewable energy incentive programs for every state. This is an invaluable resource for growers looking for opportunities to reduce costs and lower the environmental impacts of their operations.
Clean energy options like solar are a natural choice from an environmental, business and marketing perspective. With energy costs accounting for nearly 50% of indoor-grown cannabis, any opportunity to reduce those expenses will help the bottom line. In addition, as the cannabis market becomes more saturated, it will also help to achieve competitive pricing.
Growers can take advantage of a variety of incentives for renewable energy. Solar projects qualify for the 30% investment tax credit (also known as the federal solar tax credit) and 100% of the accelerated depreciation expense in the year the system is operational. In addition to the federal tax benefits, many states have aggressive incentive programs for solar energy. The best place to learn about your state’s specific incentives is the DSIRE website (www.dsireusa.org).
Renewable energy, both on-site and via the utility, will also have a substantial impact on cutting the highly intensive carbon footprint of growing facilities. As a large percentage of cannabis consumers are predisposed to environmental messages, growers who embrace renewables can differentiate their brand with an environmentally friendly message that resonates with their customer base.
Advances in Clean Energy
Resiliency is another key consideration for growers. Loss of power for even one day could cost a large grower nearly $1 million. Ironically, many facilities rely on expensive and environmentally-unfriendly diesel generators for backup power. Energy storage is a new solution that, when paired with solar, is an ideal way to ensure resiliency while reducing costs and emissions. It has the added benefit that it can be deployed to help defray an often overlooked — but very expensive — line item on utility bills called demand charges.
Demand charges are part of the utility bill based on a customer’s peak energy usage. The charges vary by utility, tariff and territory, but there are several states where cannabis growing has been legalized and where demand charges are some of the highest in the country, such as California, Massachusetts and Colorado. In fact, those three states rank second, third and fourth for highest demand charges in the nation, behind New York.
Energy storage, combined with solar panels, can lower a customer’s peak demand by storing energy at non-peak times of the day and deploying it during peak hours. This can dramatically reduce a customer’s demand charges because they typically account for 30% to 70% of a customer’s bill. Energy storage policies are still being developed across the U.S.
The good news is that regulators understand the benefits of storage and are considering a range of different options to incentivize the market, including rebate policies and tax incentives. The federal income tax credit is available for storage facility investments when they are used in conjunction with solar energy facilities, if the storage facility is sized to be powered by solar energy 75% of the time. Together these incentives allow grow facilities to reduce energy costs while using clean, renewable energy.
With solar energy, growers have a proven solution that can help them reduce costs and improve margins, as well as lower their carbon footprint to help avoid regulatory surcharges. Energy storage represents another opportunity to increase operational resiliency and defray expensive demand charges. Additionally, by producing a “green” product, growers can differentiate their product from the competition.
As energy efficiency options continue to be developed for cannabis growers, solar power and solar plus storage are compelling choices that can meet their needs today and help them save money.
Scott Howe is a partner and senior vice president at Solect Energy in Hopkinton, Massachusetts.