Putting the "Green" in Renewable Energy at Cannabis Grow Facilities
Growing four pounds of marijuana at an indoor facility can consume as much electricity as the average American home uses in a year. Cannabis growth is now responsible for 1% of all U.S. electricity consumption per year, and this consumption is expected to increase to 3% by 2035.
Put another way, a cannabis grow operation can utilize as much power as a data center, so on-site solar energy generation can significantly lower a cultivator’s operational expenses.
Growing cannabis takes a lot of energy
Cannabis is typically grown indoors to better control temperature, lighting, and moisture levels. While indoor grow facilities are more conducive to growing quality cannabis, they use eighteen times more energy than outdoor facilities because the plants require continuous lighting and specific atmospheric conditions. Indoor grow lamps produce large amounts of heat, requiring air conditioning systems to keep warehouses cool. Commercial-scale dehumidifiers and water pumps are also necessary for proper irrigation and to mitigate mold growth, one of the largest issues when it comes to cultivating cannabis for consumption.
This astounding amount of energy usage is evidenced by the statistics reported in Denver, Colorado, which show a 45% load growth on its grid following the legalization of marijuana in the state. Similarly, Pacific Power Utility of Portland traced 7 blackouts to cannabis production facilities following legalization. Some localities have since imposed an electricity tariff on growers. Boulder, Colorado, now requires commercial growers to pay $2.16 per kilowatt hour or to use renewable energy systems to reduce their loads. The City of Arcata, California imposed a 45% tax on residences that use more than 600% of the baseline level of energy. Cannabis and energy use are bound to collide in places like Connecticut, a state that has recently legalized recreational cannabis but also has some of the highest electricity rates in the country.
How cannabis grow facilities can reduce energy consumption
Growers can increase their margins by pairing solar generation and energy storage with their operations. Solar Cannabis Company (formerly Solar Therapeutics), a cultivator in Massachusetts, chose to implement a microgrid to power its facility with over 5 megawatts of solar power. Solar Cannabis has been designed to reduce its expected energy consumption by 40% and its emissions by 60% of what could be expected of a similarly-sized operation.
Companies that produce solar power can sell excess power to local utility companies, thus allowing for the sale proceeds to result in an additional revenue stream when there is excess generation. Facilities that wish to power their own operations with microgrids can use combined heat and power systems and battery storage on-site to work in conjunction with solar and ensure efficiency and reliability.
Facilities that use battery storage benefit from increased protection against crop loss caused by power outages, because battery power can restore power more quickly than diesel generators, and even very short outages can result in the loss of plants. Using a microgrid also provides predictable and reliable energy costs, which minimizes the variable costs associated with operations, and growers can then choose to run grow lights at whatever intensity they deem optimal without regard for premium rates when operating at peak times.
Funding renewable energy for cannabis grow facilities
Renewable energy projects like solar and storage projects can be eligible to receive state incentives. Connecticut, for instance, will award one renewable energy credit for every megawatt-hour of electricity that a project produces. These credits are tradeable commodities that can be sold for a profit in regional energy markets or used to sell the power to local utilities at a premium price. Several states also offer financing options, such as low-interest loans, through “green banks”.
Alternatively, growers can opt to partner with solar developers by leasing their rooftop space in exchange for an agreement that the developers will sell the generated power to the growers for a fixed price that is less than the market utility rate. If structured in this way, the projects can take advantage of one of two significant federal investment tax credits, called the Investment Tax Credit and the Production Tax Credit. This return on investment would not otherwise be available to growers if they installed their own solar arrays because cannabis operations are not recognized as lawful businesses under federal law, and as such, cannot receive federal funding or benefits.
The marketing advantage of sustainably grown cannabis
Pairing solar with cannabis growth will also increase product marketability. A study showed that the carbon footprint for two pounds of cannabis cultivation is 10,141 pounds of carbon dioxide, which is almost as much as the average car emits over the course of a year. With many consumers opting to buy products from environmentally friendly entities, advertising that marijuana is grown in a sustainable way will enhance a product’s desirability.
In sum, a cannabis cultivator stands to greatly benefit from incorporating solar or other energy efficiency options into its operations. With substantial cost savings, increased reliability, and better marketability, new growers may want to consider site locations that are suitable for on-site solar generation, and existing growers can contact solar companies and developers to determine their facilities’ suitability.
Lee Hoffman is chair of the law firm Pullman & Comley with offices in Connecticut, Massachusetts, Rhode Island and New York and practices in the area of renewable energy. Liana Feinn is an attorney in the firm’s Energy, Regulatory and Telecommunications and Cannabis industry practices.
**Reprinted with permission from Benzinga.