An Analysis of Energy Efficiency Strategies in Cannabis Cultivation
Last week, Castetter Cannabis Group was featured in the Albany Times Union for an exclusive story on our recently published energy efficiency white paper.
This is a previous edition of Taproot Cannabis Newsletter, which is delivered to your inbox on a weekly basis. You can sign up here.
As the Empire State works to transition its adult-use cannabis economy from illicit to legal and regulated with the passage of Marihuana Regulation and Taxation Act (MRTA), cultivation practices, specifically those related to indoor cultivation and its energy use, are coming under the policy spotlight.
Because cannabis cultivation is a complex process that has long existed in the shadows, it remains poorly understood from a public policy perspective. With that in mind, and with legislative proposals to deal with cultivator energy efficiency currently sitting in committees in the state legislature, Castetter Cannabis Group has prepared a white paper (recently featured in the Albany Times Union) to enlighten decisionmakers on the technical aspects of growing cannabis commercially, as well as to provide them with recommendations for related policy solutions. In said white paper, we explore energy efficiency issues related to lighting, HVAC, and water and waste management.
Rather than a focusing on a particular technology or stage of the cultivation process, we generally recommend that the state take an incentivized, education and performance-based approach to cultivator energy efficiency and environmental protection. Doing so will enable stakeholders and policymakers alike to capitalize on New York’s unique opportunity and develop innovative strategies that reduce stress on the electrical grid while allowing the nascent industry to thrive.
Development of a State created “Seal” that would signify a company’s cannabis meets certain efficiency and environmental standards. This education/certification program would qualify successful participants for THC potency tax reductions to help offset investments needed to produce sustainably grown cannabis products while serving to add more transparency to the supply chain and allowing consumers to make more informed buying decisions. The goal of offering a cultivation tax credit would be to help sustainably grown products be more cost competitive.
The Office of Cannabis Management should collect and analyze usage data from cultivation licensees. This data can then be published in reports and used to best inform policy makers.
Tax credits for meeting certain energy efficiency/usage thresholds in collaboration with utility companies.
In developing the paper, we looked at other state policies both for inspiration, and to shed some light on their mistakes.
Other States and Cultivator Energy Efficiency
The Illinois Cannabis Regulation and Taxation Act mandates energy efficiency standards which New York’s legislature has copied word for word, in a recent piece of proposed legislation (S6243). The mandates, according to Sam Milton, a consultant at Climate Resources Group, are some of the “strictest in the nation.”
However, the Illinois energy service, ComEd, has an Energy Efficiency Program which includes agricultural incentives, as laid out in an “Agricultural Initiative Worksheet,” and the “Agricultural Pre-Approval and Final Application” sheets. A business must prove it is in line with the initiatives laid out, and then they will receive incentive cash from the state. But it is unlikely that indoor grow operations can even access this program. According to ComEd, “Under the Future Energy Jobs Act, customers who had an account with a load of 10MW or higher during the 12 months ending December, 2021, may not be qualified to contribute to, nor participate in, the ComEd Energy Efficiency Program. Notwithstanding any prior approval of an application for the program.” According to the National Conference of State Legislators, the average electricity usage of indoor growth facilities in Boulder, Colorado, was 41,808 kilowatt hours (or 41.808 MegaWatts) per month, so it is unrealistic that any comparable grow operations could take part in such an incentive scheme.
Colorado addresses cultivator energy efficiency through regulations and best practices. The Colorado Cultivators Energy Management program, for instance, helps businesses understand best practices and provides resources from the Colorado Department of Public Health and Environment.
Municipalities also play a huge role ensuring energy efficiency. For instance, the City of Denver department of Public Health and Environment led a working group in 2016 which led to the city’s government amending building codes regarding lighting and cooling and humidification. Regarding lighting, “the city requires that 80% of total watts of lighting used for plant growth to be provided by lighting fixtures/luminaires meeting efficacy of 1.6μmol/J or bulbs/lamps that meet 1.9μmol/J with efficacy verified by either listing on the Design Light Consortium’s Horticultural Qualified Products List or third-party verification. This code will allow the use of double ended HPS lighting and is in line with a proposal in the 2021 International Energy Conservation Code.” However, the μmol/J PPE measurement is hardly used in cannabis cultivation.
Cultivators operating the state of Maine can access energy efficiency incentives provided by Enlighten Your Grow, a project of the Climate Resources Group. Provided through “Efficiency Maine,” these include Custom Inventive Programs based on the scope of the efficiency project and site-specific engineering analyses. Maximum project funding is capped at $1,000,000 per customer. The program also includes free scoping audits to provide customers with access to professional expertise on specific energy efficiency upgrades to existing facilities, as well as providing ongoing technical assistance to customers during the timeline of the energy efficiency project.
Massachusetts takes a hybrid approach to tackling energy efficiency in cannabis cultivation, interweaving regulatory mandates and financial incentives. The regulatory prong of this hybrid approach includes mandated energy efficiency criteria and environmental best practices built into the licensing process. Applicants for licensure must include a summary of their written standard operating procedures as they relate to efficiency and conservation. An architectural review is also conducted as part of the licensure of a cultivation facility, as Growers can take advantage of financial incentives provided by their local utility via the “Mass Save” program.
Cultivators in Oregon are encouraged to employ efficiencies in their operations through economic energy efficiency incentives offered by applicable utilities for indoor grow facilities. Such incentives include those pertaining to horticultural lighting, irrigation systems and upgrades, greenhouse upgrades, heating and cooling systems, and dehumidifiers. The Energy Trust of Oregon compiles information on available incentives.
Incentives for horticultural lighting are available through Portland General Electric and Pacific Power as lighting technology overwhelmingly dominates overall energy use for indoor grow facilities.27 Operators must work with a “Business Lighting trade ally” on lighting upgrades and controls in order to establish eligibility for a customized lighting incentives. Additionally, incentives are only available after upgrades or efficiency controls are already installed, rather than available on the front end to facilitate the capital incentives.
For dehumidification upgrades, cash incentives are available for growers operating in specific utility service areas for replacing old equipment with an energy-efficient dehumidifier. For instance, growers operating in Portland General Electric’s service area can apply for a $7 per pint, per day for replacing existing equipment in existing facilities with energy efficient equipment and $5 per pint per day for installing energy efficient dehumidifier equipment in a new facility. Such incentives are limited to a total of $10,000-14,000 per facility and growers may only apply for the incentive for one dehumidifier per facility site.
Through the Energy Trust, cultivators are also eligible for custom incentives for larger, more comprehensive renovations to their facilities. The Energy Trust also offers practical, energy efficiency training for operators through individualized technical assistance.
A Good Start
We believe this white paper for prompting a comprehensive dialogue to ensure that New York is a leader when it comes to cultivator energy efficiency. But beyond the paper, a crucial element of cannabis energy policy development is stakeholder involvement. Looping industry operators into the conversation ensures that decisionmakers have access to facts on the ground, specifically regarding technical specifications and requirements for effective operations. Such involvement and the conversations had therein can help to shape develop good policy that accounts for both the public good and related policy goals as well as industry needs.