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Powering the Energy Intensive CEA Cannabis Segment

image credit: Image taken by and used with permission from Daniel F. Duran, PhD.
Daniel F. Duran, PhD's picture
Department Chair, Associate Professor - Department of Business Administration Whittier College

Dan is a tenured Associate Professor of Business Administration at Whittier College where he teaches Sustainable Development. He is also the founder and President of Energized Solutions (ES)...

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  • Jan 22, 2019 7:30 pm GMT

This item is part of the Special Issue - 2019-01 - Predictions & Trends, click here for more

Why should utilities be concerned about cannabis production in the Unites States?  Cannabis agriculture is a multi-billion dollar industry in the United States that is changing rapidly with policy liberalization. At this time, more than 60% of the US population have access to cannabis as 33 states (including the District of Columbia and the territories of Guam and Puerto Rico) allow medical use of cannabis by individuals with a doctor's recommendation. The recreational use of cannabis is also gaining momentum, as it is now legal in ten states (Alaska, California, Colorado, Maine, Massachusetts, Michigan, Nevada, Oregon, Vermont, and Washington) and the District of Columbia. Concurrent with this growth in cannabis access is decriminalization of cannabis in another 13 states plus the U.S. Virgin Islands. The level of US consumption has grown dramatically from approximately $5.5B sales in 2015 to $7.5B in 2017 and almost $11B in 2018. The forecast for the future shows an even more dramatic increase with estimates of sales volume of $20-25B in 2025 and up to an astonishing $75B by 2030. These estimates may appear to be “pipe dreams” of growers but are in fact drawn from research and other agencies including the Wall Street Journal, Bloomberg, and the California Department of Food and Agriculture among others.

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This brief piece considers the current state of Controlled Environment Agriculture (CEA) for cannabis production and is based on past business experience managing utility based Ag AE’s and conducting Ag focused seminars, training sessions, baseline assessments, and environmental analyses. The primary goal of the research and consulting work has been to better characterize the connections between energy-water utilization and agricultural crop production with a current focus on the implementation of energy efficient and environmentally responsible CEA operations in urban environments. There is an urgent need for systematic empirical research on energy efficiency and sustainable practices.

The unfortunate fact is that the Utilities operating in service areas where cannabis production is moving from the illegal to the legal have largely ignored the business and energy efficiency implications of the rapidly expanding cannabis sector, specifically the explosive growth of indoor cultivation. Based on more than a decade of managing utility teams in the AG sector and gathering energy usage and other data from the big agricultural customers throughout California it is my assessment that a few of IOUs have done a fair to OK job of understanding and supporting the traditional and diverse Agricultural sector (Ag). Unfortunately, this is not the case in respect to the utility industry’s general understanding of and lack of planning for the exponentially growing cannabis industry. Both permitted and unpermitted cannabis growers who operate in the CEA space are BIG energy users with estimates ranging from 35-45% of operating expenses. Based on a decade of field research and extensive data gathering the case is that almost all of the serving utilities where CEA operations are underway know little about this exploding segment and lack the knowledge and motivation to support sustainable energy, water, and waste practices. This is especially the case large-scale Controlled Environment Agriculture (CEA) cannabis operations that can result to three or four crop turns where energy is consumed at high rates around the clock.  

The most significant growth in the cannabis business has been the emergence of CEA and its associated energy implications. CEA is a production approach that operates “sealed” (controlled) rooms to control temperature, humidity, CO2, and other conditions to maximize crop production, especially for high value crops.  While CEA is not a new production approach in the Ag sector as it has been used for other high-value crops it is increasingly being adopted by cannabis growers as it can generate 3-4 cannabis crops (turns) per year, supports more strains and optimizes quality control far superior to outdoor systems. The typical CEA operation for cannabis production can support one plant per 4 square feet with the potential output of one-half pound per plant. The CEA production model allows the grower to vary energy and water inputs by production phase, especially the variable lighting to address growth stages.

CEA for indoor cannabis production is an energy intensive operation with energy consumption per square foot for indoor grow operations often calculated to be about ten times that of a typical office building. Why is so much energy needed? It’s used for lighting, AC, chillers, dehumidifiers, carbon and high-efficiency particulate air (HEPA) filters, fans, and system controllers. In a recent study done for investor-owned San Diego Gas & Electric, Evergreen Economics broke down the energy consumption for indoor cannabis production and found that lighting accounts for 38% of the energy consumed, venting 30%, and air conditioning 21%.

This and related energy considerations were articulated to the industry in the seminal energy focused piece “The carbon footprint of indoor Cannabis production” by Evan Mills (2012 by Energy Policy). The Mills model considered the intense energy intensity inputs of lighting, ventilation, AC, heating, water, CO2 injection, drying and vehicle emissions. The Mills model and scoping inputs that have long stood as the “base” for the few researchers and growers when considering and estimating energy uses, costs, and greenhouse gas emissions. Other papers and research have updated the Mills model but the scoping methodology has generally withstood the test of time although legal, technological, and consumption patterns have changed since that seminal piece. As Mills noted in his piece the “The unchecked growth of electricity demand in this sector confounds energy forecasts and obscures savings from energy efficiency programs and policies”. He goes on to warn that without collaboration by utilities and growers to help manage energy use the indoor production practices would prove to be non-viable, especially with an increase in production and the lowered pricing of the finished product.

The US utility industry, including the state utility commissions, have largely chosen to ignore the energy appetite and environmental implications of the cannabis producers, specifically the CEA cannabis producers that are increasing in number, size, and location. That situation is slowly changing as a few recent reports have set the stage for a deeper consideration of the energy implications of the cannabis sector, specifically for CEA operations. In 2017 alone a handful of utilities and state agencies took a few first steps to better understand the energy implications of cannabis production and post-harvest processing as evidenced by SDGE’s Cannabis Agriculture Energy Demand Study conducted by Evergreen Economics (2017), the CPUC’s workshop report on Energy Impacts of Cannabis Cultivation (2017), and the ERA Economics report on the Economic Impact Analysis of Medical Cannabis Cultivation (2017) prepared for the California Department of Food and Agriculture.  There is now a small but growing base of information about current energy practices and opportunities in the cannabis business. For example, PGE recently stated that it would offer standard agricultural rates and energy efficiency offerings to cannabis grow facilities. CEA has emerged as one of the primary drivers in the business and but the majority of the utility actors have yet to show up to the CEA stage. The Mills and aforementioned pieces that appeared in 2017 deserve reading and reflection by the utility sector given the acceleration of production, consumption, and legalization.

In my home state of California, the recent passage of Prop 64 in California has generated increased interest in both indoor and outdoor cultivation, specifically for new CEA operations that are prime candidates of an energy efficiency approach from room design to daily operations. California is the #1 cannabis producer in the US with a sales value of $3.7B in 2017 and a 2020 projection of $7.5B and the potential for 100,000 cannabis industry jobs. Several states, including California, require applicants for licenses to submit extensive plans for both outdoor and indoor cultivation categories to meet the requirements for specific license types associated with outdoor, indoor, and mixed light requirements. Of special note is the fact that while historical cannabis production in California was primarily based in Northern California using outdoor growing operations the current projections provided by the California Department of Food and Agriculture and other agencies is that new production operations will migrate to Southern California (where the market is strongest). Coincident with this geographical change of production emphasis is the forecast that CEA production technology will grow from its current 16% base to more than 50% of total new production in the state over the next few years. The CEA movement is advancing quickly into utility service areas that are unprepared and largely hesitant to meet the challenge and opportunities associated with this production technology.

The most valued of the currently available license types in California is the Type 2A that allows “small cultivators” to use artificial lighting for operations between 5,001-10,000 sq. feet of total canopy on a single premise. A permitted CEA Type 2 grown room with 10,000 sq. feet of canopy can accommodate 400 5x5 grow pads. Assuming three to four turns per year and a production yield goal of  0.5 lb. of bud per plant the average 5’ x 5’ can support an average of eight plants per turn for 32 plants for the year. The yield from a well-managed 5’ x 5’ grow plot producing four harvests per year can yield 10-15 lbs./yr. Based on the data available from the aforementioned reports and studies as well as from direct discussion with growers in California and Colorado it is estimated that materials and consumables per lb. averages $225/lb. with the energy cost accounting for approximately $75. Hence, even a modest reduction of energy costs using energy efficiency measures will contribute significantly to the grower’s bottom line and commitment to environmental responsibility. While there are a host of other environmental considerations associated with CEA such as water and waste management the concern with reducing GHG is paramount as 1 lb. of cannabis production using current CEA production methods can generates more than 2,000 lbs. of carbon dioxide. This is an area where the grower and utility can support a Triple Bottom Line strategy of improving conditions for the people, profit, and planet.

The axiom that you cannot improve what you do not measure speaks directly to the dilemma faced by utilities that supply the energy used by the CEA growers. The core message to utilities is that a CEA systems approach applying current and evolving energy efficiency technologies and practices will support integrated production and crop analytics. Growers benefit from real-time and virtual climate control systems that support multi-zone operations (grow and post-harvest) and energy efficiency technologies for lighting and climate control. CEA systems allow growers and service providers to track and assess all production inputs (energy, water. manpower). The CEA grower can in turn collaborate with utilities to provide data on plant needs, common equipment needed, operations practices and other business practices. The informed CEA grower needs to be perceived by the utility as an informed customer, one who is environmentally responsible.  

The “bottom liners” is that research on cannabis agriculture systems, specifically CEA systems, is especially urgent in light of recent policy liberalization which is facilitating a transition in cannabis from an illegal drug to a licit agricultural crop.  This expanding market, coupled with new opportunities to grow cannabis using a CEA systems approach suggests significant near-term shifts in production that considers the energy and environmental implications. Utilities have a responsibility to understand this new set of customers who have historically viewed energy efficiency a secondary to maximizing production. The CEA cannabis grower has a responsibility to maximize production output using energy efficiency and environmental practices that benefit all the stakeholders, including the end-users and the service providers.

Image taken by and used with permission from Daniel F. Duran, PhD.
Daniel F. Duran, PhD's picture
Thank Daniel F. for the Post!
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