How cannabis businesses can tap into free utility money
For most indoor cultivators, energy expenditures are among the most significant line items in their operating budget. While many growers blindly accept their energy bills as the inevitable cost of doing business, those operators that learn how to reduce their energy operating costs will be better positioned as competition heats up.
Even better, companies that tap available incentives to reduce the upfront cost of energy efficiency and clean energy technology will have even deeper advantages. They will be working with better equipment and will have collected thousands of dollars from their local utility and/or state energy office for using state-of-the-art technology. A recent client received a rebate worth more than $625,000 for an LED retrofit project.
Where the money is
Although it seems counterintuitive, many electric utilities nationwide incentivize growers to use less power, because it is so costly for the utility to produce or purchase energy, particularly during peak demand periods.
Local energy utilities, especially if they are a large, investor-owned utility, may incentivize cannabis growers to purchase and install equipment for their grow rooms, including LED horticultural lights, custom HVAC systems, environmental controls and even industrial technologies such as combined heat and power (CHP) or gas-driven chiller systems. Rebates are also available for non-grow equipment, such as lighting for offices, retail spaces, hallways and parking lots, space conditioning, kitchen equipment and much more.
Some of the best utility incentive programs are in the Northeast. Connecticut, for instance, has some of the best incentives in the United States, where growers can expect to receive 40 cents per kilowatt-hour saved during the first year, or up to 95% of the incremental cost. Maine has many great programs as well, where growers can expect to see 28 cents per kWh saved, or up to 75% of the incremental cost. Other notable states with high-value incentive programs include New Jersey, New York and Massachusetts.
The good news for cannabis operators setting up shop in Mid-Atlantic states is that many of these states have well-established and lucrative energy efficiency programs. New Jersey growers can get a flat incentive for DLC-listed LEDs. Maryland companies are eligible for up to 20 cents per kWh saved and up to 50% off of energy-efficient technology. Growers in these states may also be able to take advantage of incentives for solar and other clean-tech.
The Midwest generally has decent utility incentive programs. Michigan’s major utilities offer good incentives at around 8-10 cents per kWh saved, or up to 75% of the incremental cost; Michigan utilities also offer retroactive rebates for projects installed up to nine months prior to submission. The largest utilities in Oklahoma offer incentives for up to 75% of the project costs.
Operators looking to capture energy efficiency rebates should take the following steps:
1. Research programs available locally. Visit the utility provider’s website or reach out to their customer service and inquire about energy efficiency incentives they offer businesses, especially those related to agriculture or cannabis cultivation.
2. Review the eligibility criteria for the incentive programs. Make sure your cannabis business meets all the necessary requirements, including equipment eligibility, licensure, account type, location restrictions and compliance with relevant laws and regulations. Equipment vendors may be able to offer some information about the local rebate programs. Watch out for incentive caps, which can limit the potential payout.
3. Gather all the necessary documentation, including project energy savings analysis, cost data, floor plans, equipment specs and any other required information. Submit the application and be ready to respond to questions from the utility. Keep in mind that an incomplete or inaccurate application may slow down or even kill your incentive opportunity. Many operations will outsource this step to a third party, as it can often take many hours of dedicated effort over many weeks to secure a successful incentive offer.
4. Research additional grants, rebates or programs offered by state government programs that support energy efficiency initiatives or sustainable agriculture. These programs may provide cash payments or other incentives to encourage the implementation of energy-efficient technologies.
5 .Once you receive approval for your purchase and install the equipment, tell your energy efficiency program that you are ready for your post-installation inspection. Assuming your installation matches the project you applied for, the utility will write up a report and process your payment. You should get your incentive check in the mail after a few weeks.
The West Coast
West Coast utilities have been working with regulated cannabis businesses for arguably longer than in any other region. Look out for mature prescriptive programs from the Energy Trust of Oregon, in particular. California, unfortunately, continues to struggle to find the best way to serve its customers. As of this writing, the best opportunities for incentive dollars are for retrofit projects or new HVAC projects.
The Rocky Mountain states of Arizona, Montana, New Mexico and Utah all offer good incentives. Xcel has amazing and easy-to-get rebates for LED installation, while other utilities in the region spread their energy incentive dollars evenly across lighting and HVAC.
Many states in the Southeast do not have high-paying incentive programs; a few do not even have incentive programs at all. Southeastern states with emerging cannabis industries, such as Alabama, Florida, Georgia and Mississippi, all have very poor energy efficiency incentive programs.
Incentive programs vary state by state and even by utility. The only sure way to know what programs are available is by getting in touch with the local utility. There are also professional energy firms that can assist businesses with the application process and maximize their incentive opportunity.
How growers can get in on the action
Utility energy efficiency programs generally come in two flavors: custom and prescriptive.
Until very recently, nearly all cannabis projects had to go through a utility’s custom program. Custom programs are typically for larger, more complex projects and will require a site-specific energy savings analysis.
Prescriptive programs offer fixed-price incentives for a predefined list of “off-the-shelf,” widely available measures, such as lighting, heat pumps, boilers and furnaces, HVAC equipment, etc. Most other projects fall under custom programs.
Noah Maghsadi and Sam Milton are with Climate Resources Group, a company that provides energy and sustainability services to the cannabis industry through its Enlighten Your Grow program.