May 14, 2021 By Peter Ross
New York's recent legalization of recreational marijuana for adult use has set off a flurry of entrepreneurial activity as businesses seek to establish a foothold in the State's new and lucrative market. Renewable energy, energy storage and other technologies can help growers not only minimize their electricity bills – a substantial operation expense for the typical indoor farm – but also give them a leg up in the State's licensing process. This blog post outlines the energy challenges posed by the nascent cannabis industry, as well as cost-effective opportunities that businesses can seize and that energy and efficiency resource providers can offer. These measures can make cannabis operations more economically competitive, environmentally friendly, and potentially improve their license applications.
I. Environmental Impacts of Cannabis
Due to their fans, lights, and 24/7 operation, indoor cannabis farms and manufacturing facilities consume a lot of electricity. This not only imposes a significant operating cost on individual growers through their monthly electricity bills, but can also strain the local utility's distribution grid. For instance, according to the Northwest Power and Conservation Council, indoor commercial cannabis production can consume 2,000 to 3,000-kilowatt hours (kWh) of energy per pound of product.
Legalization of marijuana in other States sheds light on what New York's electricity sector can expect as the cannabis industry takes root. Following legalization in Colorado, electricity use from cannabis cultivation and infused products manufacturing grew to about 4% of Denver's total electricity consumption in 2018. Significant additional load when not addressed can lead to failures in the electric system. Pacific Power, the local utility for Portland, Oregon, reported that marijuana grow houses triggered seven blackouts during the summer after recreational marijuana was legalized.
Harmonizing the growth of New York's cannabis industry with sustainable practices is especially important in light of the State's ambitious and legally-binding decarbonization goals. The Climate Leadership and Community Protection Act of 2019 (CLCPA) requires New York to reduce greenhouse gas emissions 40 percent below 1990 levels by 2030 and 85 percent by 2050. The CLCPA also mandates 185 Trillion BTUs in end-use savings in the building and industrial sector by 2025. Integrating a new energy-hungry sector into the State's existing economy will increase the challenge of meeting these benchmarks.
II. Permitting Advantages for Climate Resilient Applications
For certain businesses, developing a carbon-friendly cannabis operation may be necessary to operate in New York as a threshold matter.
The Marihuana Regulation and Taxation Act of 2021 (“Act”) established a Cannabis Control Board (“Board”) and directed the board to develop regulations for granting or denying initial adult-use cannabis licenses. Under the Act, the Board, in consultation with the New York State Department of Agriculture and Markets and the Department of Environmental Conservation, “shall promulgate necessary rules and regulations governing the safe production of cannabis, including environmental and energy standards and restrictions on the use of pesticides and best practices for water and energy conservation.”
Section 64 of the Act sets forth several climate-related selection criteria that the Board should consider in determining whether to grant a license. One such criterion is the applicant's “ability to increase climate resiliency and minimize or eliminate adverse environmental impacts, including but not limited to water usage, energy usage, carbon emissions, waste, pollutants, harmful chemicals and single use plastics.” Additionally, if the application is for an adult-use cultivator or processor license, the Board must consider “the environmental and energy impact, including compliance with energy standards, of the facility to be licensed[.]”
And these considerations are not new or unique to New York. For instance, Georgia, who hosted one of the more recent competitive state cannabis licensing rounds, specifically sought information associated with the applicant's energy plan, water use plan, and environmental impact plan. These sections, seeking similar overarching criteria as identified in the Act, affirmatively required creative plans as part of the competitive application process. In short, an astute and up-to-date environmental plan that takes into account state renewal energy policies is not only a good business practice, but more so, often the difference between a winning and losing competitive cannabis licensing application.
Accordingly, New York applicants that can demonstrate that their business will be conducted with minimal climate impacts, including those attributable to the electricity consumption, will be better positioned to compete in the upcoming New York licensing rounds.
III. Renewable Technology Opportunities
Fortunately, New York provides many ways to facilitate the adoption of climate-friendly measures for existing and yet-to-be-constructed cannabis facilities. These services can be provided by the grower, or the many third-party contractors that currently operate in the renewable energy sector. Many of these options are complementary and can be combined to create a comprehensive electricity management strategy.