January 15, 2020

Three Big Questions about the Energy Impacts of Growing Legal Cannabis

Molly Graham

As more states pass adult consumption legislation, what does the emergence of this new industry mean for state and local clean energy goals?

Cannabis legislation is creating an exploding new industry unlike traditional agricultural businesses. The race to be the first on the market can incite quick decisions regarding facilities and growing equipment, which often results in substantial energy impacts. Growing cannabis is an energy-intensive process, and as cultivators focus on getting product ready as quickly as possible, it will be easy for energy efficiency to get pushed to the back burner with little concern for increased energy consumption.

Consider early adopters like Colorado and Oregon: in Denver, cannabis facilities are consuming 4 percent of the city’s electricity, while Oregon has experienced localized blackouts due to the added strain on the electric grid from indoor cannabis cultivation. States interested in legalized cannabis can learn from these early adopters to ensure energy efficiency and grid reliability initiatives are not compromised by this nascent industry.

How Much Energy Does it Take to Grow Cannabis?

The short answer: we do not know exactly.

Outdoor cultivation uses the least amount of energy, followed by greenhouses and indoor cultivation. Not all climates will be suitable for outdoor cultivation year-round and in some jurisdictions, outdoor and greenhouse cultivation is restricted or completely prohibited. While the energy impacts from indoor cannabis cultivation are significant—a 2018 study reported the lighting demand is 70 times more energy intensive than commercial office buildings—we do not yet have a widely accepted energy use intensity. Cannabis cultivators are hesitant to share data on their facilities for at least two reasons: cannabis’s illegal status at the federal level and a desire to protect trade secrets in the competitive marketplace. This makes it difficult to establish an industry energy usage baseline for comparative analyses such as average energy consumption per pound of cannabis flower.

As legal cannabis markets begin to mature, more data is becoming available through industry resources like the Cannabis PowerScore, an online reporting tool designed by the Resource Innovation Institute to help cultivators benchmark their energy use against their peers. The current sample size is small and only contains data on electricity usage; natural gas usage is a new field within the tool and data will become available as more cultivators track their gas consumption. Ongoing reporting will be critical to build robust datasets to inform the creation of new resources for cultivators, utilities, and policy makers.

Growth in energy consumption is not just a problem for electric utilities. Cultivators will need more heat—often from natural gas—to keep facilities at optimal growing temperatures in cooler climates. Utilities will need to prepare for additional unanticipated load growth, which can set back energy efficiency goals and cause issues with existing energy distribution systems.

How Can New States Curb Demand without Stifling the Industry?

The short answer: sustainable policies that allow for energy efficiency incentives.

An early emphasis on energy efficiency can mitigate otherwise higher investment for utility infrastructure upgrades to meet new energy demand. For states considering new legislation, requiring sustainable growing practices will help avoid repeating some of the problems early adopters faced. As more states begin to legalize cannabis, legislation that incorporates sustainability measures focused on energy, water, and waste is becoming more commonplace. States interested in legalization should also strongly consider allowing for cultivation to occur outdoors or in greenhouses to capitalize on sunlight. For states with existing legal cannabis markets, cultivators applying for a new or renewed license should at a minimum be required to meet with local utility providers to discuss energy efficiency opportunities.

Putting ongoing energy reporting requirements in place when passing legislation can also inform the creation of new resources for the cannabis industry. With more data, utilities and energy efficiency–related businesses can better design efficiency programs and generate tools to educate new cultivators. Understanding energy use can also help cultivators remain competitive in the new legal market. Energy can represent over 30 percent of a cannabis cultivator’s operating costs, presenting an opportunity for energy efficiency to have a large influence on profit margins. In more mature markets like Colorado and Oregon, many companies have gone out of business due to the reduced price of cannabis in an oversaturated market. If cannabis cultivators want to remain cost competitive, tracking energy consumption will shed light on how and when their facility uses energy in order to stave off shrinking profit margins.

What Steps Can Utilities Take to Encourage Efficiency?

The short answer: create energy efficiency programs for cannabis and provide design assistance for new facilities and retrofits.

Purchasing energy efficient equipment can be expensive and confusing to the everyday consumer. Utilities can provide incentives to bring down the upfront cost barrier to purchasing new, more efficient equipment and can often help with selecting the right pieces of equipment, leading to changes in purchasing behavior. However, cannabis facilities are a new type of customer utilities are not accustomed to serving. Cannabis cultivation centers use energy differently than traditional commercial or residential customers, so designing efficiency programs specific to the needs of the industry will be crucial to getting customers to participate.

Lighting, space conditioning, and dehumidification are huge consumers of energy in indoor cannabis cultivation. Cultivators have been hesitant to adopt new efficient technologies simply given their risk-averse nature and the amount of money at stake with each plant harvest. Early LED products, for example, did not deliver the plant yield that was promised by manufacturers, and cultivators quickly removed them from their facilities and became wary of efficient lighting equipment. Over the past several years, horticultural LEDs have advanced significantly and can now compete with their less-efficient predecessors in terms of crop productivity. Bridging the education gap between cultivators and lighting manufacturers will be critical to increase adoption of efficient lighting.

Retrofitting cultivation centers to become more efficient takes a systems-based approach and requires significant upfront capital and expertise. For example, switching to efficient lighting technologies is not just as simple as swapping out old bulbs for newer, more efficient ones. A shift to LEDs means cultivators must adjust the design of their facility including mounting distance to the plant canopy, number of fixtures needed, and amount of cooling and dehumidification required to maintain optimum growing conditions. All of this demonstrates the interconnectedness of the equipment in a cultivation center and the need for additional resources to help cultivators understand the systems they operate. Moreover, once plants are introduced to a facility, equipment retrofits are harder to achieve, so the best energy efficiency opportunities exist during the facility design phase when equipment is still being selected.

Utilities have provided design assistance programs to customers for years, for both new construction projects and retro-commissioning for existing buildings, but will need to become familiar with the unique needs of cannabis facilities before offering recommendations, as a change to one variable will impact the efficiency of the entire system.

Conclusion

The potential energy impact of legal cannabis cultivation is significant, but new states can minimize growing pains by learning from the successes and setbacks of early adopters.

As this industry continues to expand, sustainable policies need to be implemented, including requirements to meet with local utilities and submit energy data, to spur the development of new programs and resources. Utilities have the potential to play a significant role in shaping the energy profile of this industry but will require a proactive approach to engage these customers before facilities are fully designed and equipment is purchased. Distribution system upgrades may be necessary if demand-side management opportunities are missed, which can be costly for both utilities and consumers.

Energy efficiency can greatly reduce the otherwise staggering amount of energy required in cannabis cultivation. However, in order to be successful, the energy efficiency community must develop the necessary expertise on the unique energy needs of the cannabis industry. Generating resources and programs to reduce energy at agricultural facilities is not a new concept, but a custom approach needs to be employed before earning the trust of the cannabis industry and truly impacting cultivation practices. 

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    Molly Graham

    Molly Graham is a senior program manager at the Midwest Energy Efficiency Alliance (MEEA), a collaborative network focused on advancing energy efficiency in the Midwest for sustainable economic development and environmental stewardship. Illinois and Michigan recently allowed for recreational cannabis cultivation and sales; MEEA is working with the state agencies, local utilities, and energy efficiency program implementers to design policies and programs focused on energy efficiency investments for cannabis.