By - Jim Vess

Market pressure, state and local governments pushing marijuana growers to be more energy efficient

Energize Weekly, January 9, 2019

Legal marijuana cultivation—which is spreading across the county—is one of the most energy-intensive economic activities and is spurring the industry, as well as state and local governments, to seek ways to make grow operations more efficient.

Thirty-three states and the District of Columbia have passed laws legalizing marijuana in some form. Others, notable New York and New Jersey, are seeking to extend the market.

An analysis by New Frontier Data, a cannabis market analyst, forecasts the industry’s electricity demand to grow 162 percent between 2017 and 2022 to 2.8 million megawatt-hours (MWh), enough to power about 250,000 homes for a year.

The demand for heating, cooling, dehumidifying and lighting make indoor grow facilities 70 times more energy intensive as an office building and nearly twice as energy intensive as a quick-service restaurant, the next most energy demanding commercial activity.

Denver, Colo. is home to 300 grow facilities. In 2018, the industry accounted for 4 percent of the city’s total electricity demand, according to city data.

“Growers and utilities both are looking for answers,” said Derek Smith, executive director of the Portland, Ore.-based Resource Innovation Institute, a non-profit promoting cannabis industry efficiency and sustainability.

Still, uncertainties in the market and secrecy among growers, a throwback to the illicit roots of the business, make progress slow, Smith said,

Illicit marijuana cultivation still dwarfs legal cultivation, accounting for 60 percent of the market and consuming 75 percent of the electricity. These backroom, bedroom and garage grows are highly inefficient, Smith said.

“The more efficient we can make the regulated market, the more it can outcompete the illicit market,” Smith said. “So, governments who want to reduce crime and preserve tax revenues should promote efficient cultivation.”

For the moment, however, governments dealing with legal marijuana operations are seeing it as a challenge to their energy efficiency, sustainability and climate change goals.

Recreational marijuana became legal in Massachusetts in 2018, spurring the market. Massachusetts is ranked the top state in the nation for energy efficiency by the American Council for an Energy-Efficient Economy and has a goal to reduce greenhouse gas emissions 80 percent from 1990 levels by 2050.

“Massachusetts energy and emissions goals will be severely curtailed without serious thought and intervention in the cultivation of cannabis,” Darren Port, the Buildings and Community Solutions Manager for the Northeast Energy Efficiency Partnerships, said in a blog post. “The solution must come primarily from efficiency, particularly lighting efficiency.”

The lights have to be on as many as 18 hours a day. On average, lighting is about 38 percent of the energy demand, according to Denver Department of Environmental Health (DEH).

The Massachusetts Cannabis Control Commission (MCC) energy efficiency regulations mainly address lighting and building envelop. The lighting rules effectively require using high-efficiency LED (light emitting diode) bulbs, New Frontier said.

When The Clinic, a Denver-based cultivator and retailer, replaced 72 single-end lights in its grow facility with 72 LED lights, it cut the demand for electricity in half and led to a $1,400-a-month saving, according to DEH

“It was a big investment,” said Doug Ewer, dispensary manager. “LED lights are not cheap, but it is an investment that will pay for itself.”

Heating and cooling are also keys, as the grow operations try to stay in the range of 65 degrees Fahrenheit to 75 degrees Fahrenheit year-round. The lights also add to the heat on the plants, creating more transpiration and adding to the humidity. Heating, cooling and dehumidifying account for about 51 percent of a grow operation’s electricity.

The MCC created the Massachusetts Cannabis Energy & Environment working group, which is reviewing other areas where energy efficiencies could be made.

Smith said that the breakdown on energy demands will vary regionally and so must energy efficiency programs. The MCC noted, for example, that Massachusetts’ climate has a much higher dew point than Colorado, requiring more dehumidification in its grow facilities.

“The reality is nobody knows the most efficient way to do this,” Smith said. “We won’t know that until we capture enough data.”

Denver does not have energy efficiency regulations, but tries to promote energy efficiency in the industry. The city sponsors an annual Cannabis Sustainability Symposium and has developed a guide to best practices, ranging from lighting to water efficiency.

“There is a strong interest in the industry in being sustainable,” said Emily Backus, sustainability adviser at the DEH. Denver has a goal of reducing its carbon emissions 80 percent over 2005 levels by 2050.

The city of Boulder, Colo. and Boulder County have a requirement that growers offset their energy consumption with local renewable energy or pay a 2.16 cents charge per kilowatt-hour used into an Energy Impact Offset Fund.

The funds, each government collected about $350,000 in 2017, are being used to develop renewable energy alternatives. The county has distributed eGauges to growers so they can track their energy use.

The devices record energy use in 10-minute increments. “Most importantly, the eGauges tell when energy is used,” said Brad Smith, Boulder County’s sustainability outreach specialist. “They create a baseline, and we’ve worked with cultivators to avoid peak-demand changes.”

RiNo Supply Co., which operates a greenhouse-grow operation in Boulder County, has invested in a computerized system to manage heating, humidity and lighting, and installed more energy efficient lights. The result has been a 30 percent to 40 percent drop in the facility’s electric bill to about $20,000 a month.

“We are always looking for ways to be more efficient,” said Brian Matthews, RiNo’s general manager. “If you aren’t efficient, you aren’t in business anymore.”

Sonoma County, Calif., like Boulder County, has a requirement for 100 percent renewable energy for grow facilities or an offset. The Energy Trust of Oregon, a nonprofit organization, offers licensed growers free technical services and cash incentives for the installation of energy efficient equipment at new and existing grow facilities.

In many quarters, energy efficiency remains a tough sell in the industry.

“It is an all-cash business, and it isn’t like any other business that can call up its bank and get a loan,” Backus said.

Some cultivators are “uncomfortable making an investment that pays back in five or six years when they don’t know if they’ll be in business in six years,” Backus said.

Boulder County’s Smith said there are “split incentives” because cultivators usually don’t own the buildings and are reluctant to make improvements. “A lot of these cultivators are only looking ahead a year or two because the market is so crazy,” he said.

In Colorado, the wholesale price of marijuana has dropped in the last four years to $800 from $4,400 a pound, according to growers.

Still, lower wholesale prices and the growing consolidation of the industry makes energy efficiency inevitable, according to Beau Whitney, a New Frontier senior economist.

“Due to its underground nature, people grew this in garages, warehouses, bedrooms, not the most highly efficient way,” Whitney said. “So, as it gets out into the light, there are more ‘best practices’ being shared and more advanced  growing techniques.”

“If we projected forward, people are going to scale up,” he said. “Almost a quarter of licenses in California are controlled by 10 different groups. So, you are seeing consolidation in the market, and there will be scale and efficiencies.”

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