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Pot Boiler - Bringing Cannabis' Mile-High Energy Bills Down to Earth

February 24, 2017

As of last November, 29 states have legal Cannabis in some form, in spite of the fact that it’s still a big national no-no.

 

And while lots of folks think dialing up weed-infused goodies is the best thing ever, this budding industry is not without its problems – big ones for anyone concerned about leviathan energy consumption and rising carbon emissions.

 

An industry where 50 percent (and more) of product value is slave to energy costs[i] is not sustainable.  And as more temperate states legalize Cannabis, growing will shift south, rendering these energy-hog facilities non-competitive in a national market. The onus is on facility owners to catch runaway energy costs now while this industry is still in infancy.

 

Amplify this massive energy use to a grid-wide scale, and it’s easy to see why utilities and municipal health officials are lasered in on solutions.

 

DENVER, WE HAVE A PROBLEM

 

Recent estimates put the industry’s electric use (both legal and illegal operations) at 1 to 2 percent of our national total, and 3 percent of household electricity.  California grow houses ring in at 3 percent of the state’s electric use and 9 percent of residential use.[ii]

 

The energy needed to create one Cannabis cigarette is the equivalent of what’s needed for 18 pints of beer.  And that same cig dumps 3 pounds of CO2 (carbon dioxide) into the atmosphere, or the equivalent of driving a 44-mpg hybrid car 22 miles.  Grow and sell 2.2 pounds (1 kg) of Cannabis, and the emissions are like driving that hybrid cross-country – 11 times.

 

Xcel Energy, Colorado’s largest utility and 12th-largest nationally, concurs that when recreational marijuana became legal here in 2012, the utility saw a 1 percent bump in annual electricity sales.  Minneapolis-based Xcel is agnostic about grow houses and doesn’t keep energy-use data by industry.  Mark Stutz, Senior Media Representative at Xcel, says there are approximately 500 commercial grow houses in Denver alone, and a recent Drug Enforcement Agency (DEA) estimate tags 1,200 facilities[iii] across Colorado, though that number is conservative.

 

Stutz says that energy use has leveled off since legalization, and he feels the utility can keep up with the new demand without adding new system capacity – currently tagged at 7,300 MWhs (megawatt hours).

 

There are other impacts that the fledgling industry has on the grid, though.  Stutz said that the increased demand for electricity, especially with illegal grow houses, blows out transformers.  (‘Brownout on a hot August day, anyone?  Thank a nearby illegal grow needing as much air-conditioning as a high-rise.) 

 

Another big problem is outright energy theft – usually illegal growers who hook up to the grid on the downlow and siphon energy (free to them - we honest, bill-paying customers pick up the tab instead.)  The DEA spots illegal grow houses when bills jump from, say, $100 a month to over $3,000.[iv]

 

LIGHTS PLUS …

 

There’s a whole lot more than lighting that drives energy use in a facility, though lighting can comprise as much as 60 percent of a grow house’s electricity aggregate.  Facilities need fans, dryers, heating and cooling, and ventilation, to name but a few systems that run non-stop. 

 

Efficiencies with these systems are critical, considering energy costs suck up as much as half the wholesale value of product, and a good percentage of retail pricing.  

One client in Boulder County is building a 22,000-square-foot grow facility with monthly energy bill estimates of $16,395.  The annual estimated 2,633,700 kWhs needed to run this facility would power 291 homes a year.  It would also generate an estimated 2,040 tons of carbon emissions – the equivalent of 1,975,088 pounds of coal burned.[v]  And while this is a larger facility, multiply that by the conservatively estimated 1,200 other grows in Colorado, and the greenhouse gas equivalent is a stratospheric 1,185,053 tons-of-coal-burned a year.

 

The silver lining in all this is that there are, however, ways to reduce or eliminate altogether net energy use.

 

LEED FOR WEED – As of December, the U.S. Green Building Council, which administers the LEED program, will certify Cannabis grow facilities.  The price of admission for LEED-certified new construction is that the minimum energy performance of a grow house must exceed the prevailing ASHRAE 90.1 energy standard by five percent.  Because the ASHRAE standard measures energy performance, any facility seeking the LEED cert will have a correlated five percent energy reduction.  The relationship between energy performance and bills is linear so overshooting this standard by a percentage from the gitgo should lower bills commensurately.

 

LEED certification also requires building commissioning (now required by 2015 codes).  Building commissioning can reduce energy bills by 13 - 16 percent, and minimize wear and tear on mechanical systems, thus preserving efficiencies and system durability.

 

Finally, the USGBC has documented that LEED certification raises property values by four percent.  We see higher in our marketplace, and I’ve written extensively about this before – LEED adds value to properties and connotes “class A” commercial space, something savvy investors understand.

 

LIGHTING – Lighting is the energy hog for most grow facilities (59 percent of bill totals)[vi] with lamps as high as 600-watts.  (Incandescent ceiling can lights were usually 65-watts).  Old-school growers favored metal halide and high-pressure sodium lights because they generate heat.  But any lighting that throws heat rather than light is the definition of inefficient and drives bills sky-high.

 

As legal Cannabis farming has mushroomed, there are plenty of lighting suppliers who can create hybrid lighting solutions to maximize crop output and lower electric bills.  This is critical in facilities that run 24/7, as grow houses do.

 

SOLAR - One way to erase energy use is with solar electric (PV).  There are currently eye-popping financial incentives to essentially get solar outlays paid for in 2 – 3 years, including a 30 percent federal renewable energy tax credit (currently expired, but I'm hopeful) and a 50 percent accelerated depreciation in year one.  (The accelerated depreciation starts declining Jan. 1, 2018.)  If growers don’t have acreage for ground mounting, even small rooftop solar mounts can dent energy bills.

 

Utility rebates and net-metering can be a bit trickier.  In some states, utilities have come out hard against paying for distributed energy generation like solar, and many utilities are phasing out solar rebates altogether as the price of panels plummets.  Still, the .gov incentives more than make solar an attractive option for owners and investors.

 

BATTERIES & MICROGRIDS – Piggybacking on solar is battery energy storage, popularized by Elon Musk at Tesla.  One strategy with storage is to shave electric loads.  For example, growers run heavy loads at night and pull from the grid when kilowatt hours are cheaper.  During the day when energy requirements are smaller, growing systems run off batteries, which recharge during the day from solar.  Depending on the size of solar and battery systems, It’s possible to run a facility completely on renewable and stored energy.  And the renewable tax credit (when renewed) and 50-percent accelerated depreciation would apply to this microgrid, too.

 

PACE FUNDING – “Property Assessed Clean Energy” is a new-to-Colorado concept (and other places nationwide) that allows for energy-efficiency and renewable energy to be financed through a relatively low-interest loan that carries with the property instead of with the borrower.  It’s paid annually on top of a tax assessment until the differential between a code-equivalent and the efficient, renewable-powered facility is complete – energy savings capitalized usually 20 years.  The PACE funders I work with are also agnostic about Cannabis because energy savings capitalizes over time, whether it’s a craft-beer brewery, an industrial laundry or a grow house. 

 

The challenges with this industry are enormous.  Yet 2017 is the optimal year to capitalize on .gov incentives to reduce or eliminate energy bills altogether.  Both the federal 30 percent renewable energy tax credit and the accelerated depreciation sweeten the pot.

 

Reach out anytime with questions or to LEED-certify a project.

 

 

IMAGES:  Infrared (IR) photo of grow house showing extreme heat (Op. cit., E&E News), Greenhouse gas percentages of Cannabis grow equipment (Op. cit., Evan Mills), Legal growing in Boulder County with 60-plus high-efficiency lights.

 

INFORMATION PRESENTED ABOVE IS NOT TO BE CONSTRUED AS TAX OR FINANCIAL ADVICE.  While we have years' experience in sustainability and real estate, incentives can disappear literally overnight, and all are subject to change.  Please consult your tax, accounting, utility and financial advisors to verify these findings.

 

[i] Evan Mills, The Carbon Footprint of Indoor Cannabis Production, Energy Associates, 2012.

 

[ii] Ibid.

 

[iii] E&E News, Emissions Coloradoans Feel the Heat from Indoor Grow Facilities, John J. Fialka, April 26, 2016.

 

[iv] Ibid.

 

[v] Greenhouse Gas Equivalencies Calculator

 

[vi] Op. cit., Evan Mills.

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