To say North America’s cannabis sector is on a high would be an understatement, and a pretty unfortunate pun, but it is. It’s booming and there appears to be no decline in appetite for its produce since states across the US and Canada legalised its sale for recreational use.
In 2015, Canadian Prime Minister Justin Trudeau said he would legalise cannabis use, making good on that in 2018. In the US, recreational use is permitted in 11 states, Illinois being the latest at the beginning of 2020; in total it is legal in 33 states for recreational or medicinal purposes.
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Prohibition Partners estimates the regulated market could be worth more than $47bn within five years. However, it says that the sector in the US is hampered by varying levels of regulation whilst the Canadian market continues to be bypassed for the black market by many consumers. Despite this, the industry is flourishing with a double digit annual growth rate.
The impact legal marijuana cultivation is having on the economy is one thing, its impact on energy providers is an entirely different matter. In 2015, Pacific Power, which supplies the Northwest US, said seven summer blackouts were the result of businesses and individuals growing the crop. Concerns about how much demand growth is placing on energy supplies echoed across states which have legalised it.
Is going off grid a necessity?
It stands to reason that such operations consume significant amounts of energy. “You’re trying to make an ideal summer day, with abnormal amounts of water to the route system at the same time,” says Edward Dow of Solar Therapeutics. Earlier this year, the Massachusetts-based cannabis company became one of, if not the, first to generate its own power via a 5.5MW microgrid. Power supply, he says, was the biggest issue his business faced from the outset.
Although his facility had historically been supplied from the grid, it was removed a few years before he moved in, leading to a conundrum. “This is really the biggest hurdle we faced,” he explains, “our options were to either fund our own microgrid or pay the utility billions of dollars and wait two and a half years for the power.” Instead the company installed solar arrays for when the sun is shining and two natural gas combined heat and power units for the rest of the time.
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By GlobalDataAlthough the decision is a sustainable one, it didn’t get the support of the utility says Dow. “We really tried to work with the utility company as best we could, but in the end the best solution for us was to purchase all our own assets,” he explains. It’s an interesting approach that some energy providers are taking. Arguably it would be more logical for providers to work with cannabis growers, particularly given the strain they put on the grid and the opportunities engaging with the multibillion dollar industry might present.
Can utilities cash in on cannabis?
It’s something Dow feels strongly on, however he says that engagement is only now starting to happen. “We’re trying to work towards more of a partnership in which we can sell back power to the grid in the event of emergency, or provide standby power in the warmer times of the year. So we’re trying to get there, but utilities are not in the business of letting people make their own power,” he says.
Perhaps the approach he is taking might change all that. Dow says there is an opportunity for microgrid operators and utility providers to both benefit, if utilities can ‘”get their head around it”, something he says they have struggled with. One of his proposals is for power providers to incentivise microgrid ownership by paying companies the equivalent of the connection fee, in return receiving any surplus power to push back into the grid.
Dow’s operation is unique though, very few commercial cannabis growers have such infrastructure and many more are one-man operations, often working out of residential properties.
“The increasing electricity demand we are seeing from this industry is happening especially fast,” warns Terry Young, vice president of policy, engagement and innovation at the Independent Electricity System Operator (IESO), which operates Ontario’s power grid in Canada. “The industry consumed a total of 93,000 MWh of electricity in 2018 and is expected to grow by 1,250% by 2024 to 1,258,000 MWh. By 2024, consumption from the cannabis industry is expected to total just under 1% of the province’s total power consumption.”
A multitude of solutions to cannabis facilities’ energy demands
Young says producing one pound of cannabis takes about 2,000 kWh, around two and a half months’ consumption of the average Canadian household. “The energy it takes to power lighting, heating, pumps and ventilation all adds up. Indoor cannabis facilities use more, almost three and a half times more electricity per square foot than lit vegetable greenhouses,” he adds.
It’s clear the matter needs addressing, something IESO says it is working with growers to do but it requires a “multitude of solutions”. It says that as well as working with businesses and community representatives, it is conducting studies to identify the best solutions for growers and the region.
One such study was the Greenhouse Energy Profile, summarising how energy is used across agricultural sub-sectors and regions in 2018, and forecasting energy use and savings potential from 2019 to 2024. “The Greenhouse Energy Profile shows that there is great potential for energy efficiency while reducing the need for new supply to the area and enabling new businesses to connect,” Young says. Another study is currently being conducted with the aim of developing best practice for energy management in the industry.
IESO is also running initiatives aimed at helping growers cut their energy footprint, including the Save on Energy Retrofit programme. It supports growers in managing their consumption through incentives to upgrade various equipment and lighting, such as switching to LED grow lights which would cut consumption by up to 60%.
Cannabis growers can reduce their power needs
For Dow there is already an answer to this challenge. He believes, given the climate emergency and growing appetite among consumers for environmentally conscious brands, growers are starting to look at his type of solution. “I’m hearing a lot more people saying they’re committed to doing it [microgrids] than I’ve ever heard before,” he says. “They should have started some time ago though,” he adds, aiming a little criticism at larger companies that were “either too lazy or didn’t have the foresight”.
However, for growers considering retrofitting, it isn’t cheap or easy. “I’ve seen these big operations trying to retrofit and you might as well start anew at that point,” Dow says, citing costs as the single most prohibitive factor. However, if state regulators take a lead from Massachusetts – which requires the sector to design new facilities to use a maximum of 36 watts per square foot – things might change.
For now, growers can play their part as easily as replacing bulbs which, in turn, would reduce the need for heat and ultimately cut cooling costs. For IESO’s part, it says it is committed to helping the sector meet the costs of such work with up to a 30% contribution. “Growing cannabis can require up to 18 to 20 hours of lighting per day, accounting for as much as 70% of energy costs. To put it in perspective, vegetable growers typically keep their lights on for just eight or nine hours per day,” says Young.
Given that, according to a recent study, the cannabis industry is second only to data centres for energy consumption, the power it consumes has to be curtailed. Whether that can be done by growers, energy providers, regulators or a mix of all remains to be seen. Dow, however, has a simple message: working together is the only effective way to bring about change.
