Cannabis operations are increasingly looking to renewables and batteries to offset sky-high electricity costs.
With marijuana now legal in 30 states (either for recreational or medicinal use), the cannabis industry is big business. Since legal sales first began in 2014, the industry has exploded. In 2018, it raked in $10.4 billion and experts expect it to grow 14% annually over the next few years.
Most legal marijuana is grown in indoor operations where all light, air, and moisture is completely controlled – an energy-intensive endeavor. And as the industry grows and more competitors enter the market, growers are looking to solar and batteries to cut high energy costs that plague grow operations.
Energy use will become a major issue as industry grows
In 2012, Washington and Colorado became the first two states to legalize cannabis for recreational use and now, recreational use is legal in ten states. Last year, the industry was worth $10.4 billion, with even more growth expected in 2019. By 2025, it’s set to increase to $23 billion – an annual growth rate of over 14%.
As mentioned, most of this legal cannabis is grown in indoor operations, which can produce the highest quality product, but is also the most energy intensive. As the industry grows, so will energy use.
Image Source: Graph from Solar Tribune, Data from New Frontier Data
New Frontier Data estimates that electricity use will jump from 1.75 million MWh in 2019 to 2.79 million MWh in 2022. The City of Denver, the hotspot for growing in Colorado, estimates that 45% of their electricity load (or ‘demand’) growth will come from marijuana grow operations. Even now, Denver estimates that marijuana accounts for almost 4% of the city’s total electricity consumption.
Lighting, ventilation are biggest energy hogs
The energy needs to cultivate marijuana indoors are truly astounding. As part of a 2018 report from The Cannabis Conservancy, researchers collected energy consumption rates from a handful of indoor grow operations around Colorado, who reported using about 1,200 kilowatt-hours of energy per pound of marijuana produced. In comparison, the average home in the U.S. uses about 900 kWh every month. Aluminum production needs just 7 kWh per pound produced – that’s about 0.5% of marijuana’s energy needs.
On the national level, legal cannabis cultivation consumed 1.1 million megawatt-hours of electricity in 2017, according to New Frontier Data’s 2018 Cannabis Energy Report. For comparison, that’s about as much energy as 102,000 of those average homes above in an entire year. And it’s not getting any smaller: New Frontier estimates electricity consumption from the cannabis sector to increase 162% from 2017 to 2022.
Energy expenses account for up to 50% of total wholesale costs and cultivators name energy as the second highest cost, behind labor.
Of course, marijuana and energy use didn’t always go hand-in-hand. Historically, most cannabis was simply grown outdoors. However, when the U.S. criminalized marijuana in the 1970s, cultivators moved indoors to avoid detection. Today, the majority of legal cultivators continue to grow plants inside, as it’s a more controlled environment. They’re able to increase harvests, produce higher quality product, and avoid issues like insects and disease – common challenges when growing outdoors.
Image Source: Graph from Solar Tribune, Data from E Source
With energy costs making up such a large portion of the wholesale price of cannabis, tackling inefficiencies in lighting, ventilation, and cooling can mean huge savings for growers. Grow operations need huge expanses of lighting, and it’s the single biggest energy user for indoor facilities, accounting for about 40% of total electricity use. Ventilation and dehumidification together account for about 30% of energy use and air conditioners come in 3rd. Tackling any one of these issues can mean huge savings on utility bills.
Solar and batteries seen as a solution
As the cannabis market continues to mature, competition is growing. When legal sales in Colorado first began in 2014, prices hovered around $2,500 per pound. By 2018, that price had dropped to $850/pound. To stay competitive, growers are looking to drop prices by lowering energy costs via energy efficiency upgrades, solar, and batteries.
While not as attention-grabbing as solar and batteries, simple lighting upgrades are the lowest hanging fruit for energy savings. Most indoor cultivators use high-pressure sodium lights (the lights giving off yellowish haze on city streets) in indoor grow ops, but they’re very energy intensive. By simply replacing HPS lights with LEDs, growers can not only save on lighting costs, but they’re also able to cut ventilation and cooling, as LEDs produce far less heat than HPS bulbs. By installing LEDs and more efficient HVAC systems, grow operations can shave off up to 35% of their total energy use.
Efficiency upgrades like these can only do so much and marijuana cultivation still requires huge amounts of electricity. The next logical step, of course, would be renewable energy. However, with energy use so high, many commercial buildings simply don’t have the roof space to house enough solar panels to really make a dent in energy use. Few cultivators could cover 100% of their energy use purely through a rooftop solar installation.
However, by combining solar with batteries, grow operations are able to utilize on-site solar generation at strategic times, during times of peak demand when electricity rates are highest, for example, or to help lower demand charges. With grow operations typically running 24/7, avoiding daily on-peak pricing and lowering demand charges (which are utility fees based on your highest energy usage at any one point of time during a billing cycle) can reap major savings.
In 2017, for example, California-based grower Green Dragon worked with micro-grid company CleanSpark to drop its spiraling energy use. By combining solar, energy storage, and energy management, Green Dragon was able to cut its electricity bill by an astounding 82%. CleanSpark notes that, via its mPulse software, which helps businesses avoid expensive demand charges on utility bills, Green Dragon was able to drastically reduce its demand charges, which had previously accounted for close to 50% of its monthly electricity bill. It estimates that, by adopting the micro-grid, it will increase revenue by $660,000.
As legal cannabis production continues to spread and mature, the industry will undoubtedly work out best practices to minimize energy use and production costs. Proper lighting, ventilation, and AC design and installation will allow grow operations to drop energy use as much as possible from the get-go. And as solar and batteries continue to drop in price, we can expect cannabis cultivators – as well as other industries – to continue adoption.
Image Source: CC license via Flickr
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