The start of the new year ushered in the legalization of recreational marijuana in California, the latest marker in a growing trend of states moving to legalize cannabis use.
The power industry has been grappling with several challenges associated with cannabis operations including the collection of data on growth operations.
Growing marijuana is energy intensive, which means it can lift a flat demand curve profile, but it can also strain resources.
“A cannabis grow operation compares with the load profile of a data center or a hospital,” says Lou Loos, an account manager with the Snohomish County Public Utility District in Washington state.
Recreational marijuana has been legal in Washington state since 2012. It is one of eight states, and the District of Columbia, where recreational marijuana is legal. Marijuana for medical use is legal in 29 states and the District of Columbia.
Since marijuana has come out of the shadows, and particularly with the higher demand that comes with the advent of legal recreational pot, there has been a boom in legal grow operations.
Growing cannabis outdoors is far less energy intensive than growing it indoors, but many growers choose to grow indoors to boost production. Growing outdoors yields about two harvests a year. Indoor operations can yield five or even six harvests a year. Indoor production also allows growers to closely control light intensity and spectrum, temperature, nutrients, humidity, and carbon dioxide levels. But indoor production is energy intensive.
Commercial marijuana farmers start with seedlings that are often grown in racks that are stacked vertically with fluorescent lights. When they are mature enough to be repotted, the seedlings are exposed to high intensity lights – 600 watt to 1,000 watt metal halide or high pressure sodium fixtures – for 18 to 24 hours a day until they are ready to flower, which is triggered by shortening light exposure. In the flowering cycle, 1,000 watt high pressure sodium fixtures are usually preferred for their red and yellow light spectra, and they typically run 12 hours a day.
A 1,000 watt fixture can serve a four-foot by four-foot canopy containing about four plants. In a 10,000 or 20,000 square foot warehouse, that adds up to tens of thousands of plants and a heavy electrical load just for lighting.
2016 study broke down energy consumption
In a 2016 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%.
A 2012 study by Evan Mills published in the journal Energy Policy found that it takes about 13,000 kWh a year to operate a four-by-four-by-eight foot grow area or canopy. And Mills and other researchers also have found that cannabis requires 2,000 kWh per pound to produce while aluminum requires about 7 kWh per pound.
As far back as 2012, the Lawrence Berkeley National Laboratory found that legal indoor cannabis facilities accounted for approximately 1% of national energy usage. In 2014, Bloomberg reported that licensed grow operations in Colorado accounted for nearly half of new power demand.
In Colorado, investor-owned Xcel Energy saw electric consumption increase by 1.2% between 2012 and 2013, 50% of which was attributed to cannabis cultivation. Xcel estimates that 2% of Denver’s electric consumption is due to cannabis cultivation.
About 60% of Colorado’s cannabis cultivation takes place in Denver. Recreational use of marijuana is legal in Colorado.
The issue has attracted enough attention that organizations such as the Northwest Power and Conservation Council in its Seventh Power Plan, which was adopted in 2016, included an appendix section that discussed the effects of cannabis cultivation on the Northwest power system.
The Northwest Power and Conservation Council came up with a preliminary estimate, based on 2014 data, of energy use for indoor cannabis cultivation of 80 to 102 average MW, but warned that the estimates were rough because there is not a lot of data. The plan also put its demand estimate in context by noting that Washington State’s total electric demand in 2014 was 10,600 average MW, so cannabis production is estimated to be between 0.75% and 0.96% of total demand.
Context is important. Smaller systems are more vulnerable to sudden increases in demand, but overall initial concerns about power systems being swamped by power demand from cannabis grow operations have not materialized. Tacoma Public Utilities, for instance, was preparing for a surge in consumption from cannabis cultivation with estimates that one large facility alone would hit 12 MW. It ended up using just 1.3 MW, according to a 2017 article in Bloomberg.
Finding a Baseline
Snohomish PUD estimates that grow operations in the utility’s footprint could account for 40 million kWh of demand, which Loos says is on par with the early days of the dot com boom. But, as he is quick to point out, cannabis cultivation is a completely different industry. Uniquely, it is also an industry transitioning from illegal to legal status, and that makes it difficult to gauge demand.
Snohomish originally estimated there would be about 142,000 square feet of cannabis grow operations in its territory. They ended up with 3 million square feet.
“Other industries have baseline estimates,” says Loos, but when it comes to cannabis indoor agriculture, “we can’t compare it to anything.” At Snohomish, Loos says, “part of our goal is to learn as much as possible.”
“There was a lot of pseudo-empirical data,” out there, Loos says. His response was to spend a lot of time looking at the available data, studying the issues and meeting with and visiting cannabis growers. He also looked at the experience of other utilities, such as Puget Sound Energy.
David Montgomery, consulting energy management engineer at Washington state-based Puget Sound Energy, had an experience similar to Loos’ at Snohomish. A lot of cannabis growers were popping up in the utility’s territory, but there was very little data about their power needs.
That is particularly a problem when many of the grow operations were starting out as new businesses. “We were comparing their needs to a baseline that didn’t exist.”
Puget Sound looked to California, which has a large and thriving market for medical marijuana. Montgomery interviewed medical marijuana growers in California and used that data to help arrive at a baseline consumption rate.
The resulting “industry standard” is a single 1,000-watt high density discharge light consuming 1,100 watts per four-by-four canopy area. That averages out to 68.8 watts per square foot. For comparison, office lighting in a typical commercial building is often under 1 watt per square foot.
Armed with that data, Puget Sound was able to include cannabis grow operations in its existing energy efficiency programs that offer incentives for energy efficiency upgrades for existing businesses, as well as businesses building new facilities.
Montgomery estimates that Puget Sound has done 70 or 80 projects for indoor cannabis operations. “Over the past three years, we have achieved 40-50 million kWh of energy savings,” he says.
In many commercial businesses, efficiency gains are fairly easy to achieve by switching to light emitting diode (LED) lighting. In the cannabis business, it is not so easy to convince growers to switch.
LED lights have higher upfront costs, but there is also not a lot of information on how LEDs will affect crop yields and quality, which adds to growers’ reluctance.
“Unfortunately,” Montgomery says, “there isn't a lot of research in the area due to federal regulations” that still list marijuana as an illegal drug.
But, as outreach and education improves, growers are switching. “We have seen successful growers as low as 500 watt per 4x4 area for flower/bloom lighting, and as low as 300 watt per 4x4 area for vegetative lighting” during the second stage of the plant’s growth cycle, Montgomery says. “An added benefit is that the LEDs are cooler and can be placed closer to the plants without burning them, allowing for a higher percentage of emitted light being useful to the plant.”
The legal status of marijuana at the federal level is also a complicating factor for some utilities. With an early January 2018 memorandum from U.S. Attorney General Jeff Sessions reinforcing the federal prohibition on the cultivation, distribution and possession of marijuana, many states that have legalized recreational marijuana use are now evaluating potential next steps.
California
The next big test for utility adaptation to legal marijuana is going to be in California. Medicinal marijuana has been legal there for nearly two decades, but recreational marijuana was ratified in the November 2016 election, and the go-live date was Jan. 1, 2018.
The California Public Utilities Commission held a workshop in February on the energy impacts of cannabis cultivation and to ensure that “the choices made by the cannabis industry reflect California’s climate goals” and to ensure that “California cannabis is the greenest in the nation.”
While the April report on the workshop noted that an increase in cannabis cultivation associated with recreational legalization “may be a significant driver of electricity consumption in California,” one of the takeaways from the workshop was that states that have legalized recreational cannabis “have not necessarily seen an increase in energy consumption attributable to cannabis cultivation.”
And, as utility officials in other states have noted, there is a great deal of uncertainty and lack of data when it comes to cannabis cultivation and energy use. That uncertainty is heightened by federal push back by the Trump Administration that could restrict the growth of the industry and dampen demand.
California also faces some unique circumstances. The state’s climate is more conducive to outdoor cultivation, but high electricity rates make indoor growing less attractive. “California is not going to be cost competitive at a large scale with indoor cultivation only,” one grower said at the workshop. On the other hand, many local jurisdictions have banned outdoor or greenhouse commercial cultivation.
Certainly, in an urban setting such as Los Angeles, indoor cultivation could be the preferred method.
The City of Los Angeles had originally issued over 200 permits for medical marijuana sales. The number of dispensary operations is more than 600. LADWP has no bearing on the permits, only its obligation to serve.
As of the interview date no permits had been issued for recreational sales by the city of Los Angeles.
“We know it is coming, but the extent is another question,” Carivau says. Some of the current medical Cannabis growers in the Los Angeles area are premier customers, he says. Energy usage is on par with industrial plating or plastic manufacturing operations. “It’s heavy manufacturing.”
Carivau says the utility’s system has the flexibility to deal with increases in marginal load, but he does not want to “ramp up the duck curve,” referring to a graphic representation of how load quickly ramps up in late afternoon and early evening in California when production from customer solar and other sources of renewable energy falls off. Education, energy efficiency and “time of use” rate structure will play a large role in mitigating peak energy usage.
As the go-live date approached, Carivau said LADWP was looking at the experiences of Colorado and Washington where recreational pot is already legal.
And, as utility representatives from SDG&E, Pacific Gas and Electric and the public power utility SMUD all said at the workshop, there is a need for more data.
PUC staff also concluded that the available data “are not sufficiently robust to support specific policy recommendations.” However, staff did recommend that stakeholders engage with the cannabis industry, and said it is assembling a Cannabis Working Group to look at policy issues.
One thing the commission is looking at is Oregon’s practice of requiring cannabis cultivators to forecast their energy needs before beginning operation and then submitting annual energy use reports.
A Small Town’s Experience
As California gears up for recreational legalization, it is worth noting that the experience of a utility in an urban center can be very different from the experience of a utility in a small town.
Oak Creek, Colorado, is a public power town of about 1,000 people about a 20- minute drive from the ski resort of Steamboat Springs. The town has welcomed marijuana entrepreneurs, including indoor grow operations. The town’s one block light industrial area has five buildings housing ten cannabis businesses. Four of them are grow operations.
The cannabis business has brought a 26% increase in load over the past couple of years, says Mary Alice Page-Allen, the town administrator.
Oak Creek collects its electric bills directly, so higher load generates revenues for the town. Page-Allen says the town saw $800,000 in revenues in 2016 and is expecting $1 million in 2017. The new businesses each also pay an annual licensing fee of nearly $6,000, which has helped fund the hiring of a new, full time police officer. The town has also invested $460,000 to upgrade its electric system, much of which have been supported by plant investment fees paid by the cannabis business operators.
Overall, cannabis has been a positive experience, says Page-Allen. The real estate market is booming; the town is growing. The cannabis business “has allowed us to recover from the recession in a positive manner,” Page-Allen says.
Need for data remains, researcher says
Meanwhile, Mills, the author of the study that has become a mainstay in the literature about cannabis and electricity demand, says the situation has changed little since his 2012 study. “No resources have been available to do an update, but it's sorely needed given how much the industry has changed in the intervening years,” he says.
Mills’ chief concern is that legislators and energy agencies have largely turned a blind eye to the carbon footprint of indoor cultivation. Energy efficiency has made some inroads in the industry, says Mills, but “my impression is that those efforts have been half hearted.”
One obvious solution would be to encourage more outdoor cultivation, but some localities – the whole state of Colorado, for instance – forbid it. “This is one of many ways, sadly, that drug policy uncoordinated with energy policy could well be causing energy use to increase,” says Mills.
“I've wanted to collect and benchmark real data on real facilities for years now, so that we don't have to guess or speculate about this, but no one has stepped forward to support the effort,” says Mills.
Justice Department issues memo on marijuana enforcement
Meanwhile, the cannabis industry and states where marijuana has been legalized are sorting through the implications of a Jan. 4 U.S. Department of Justice memo on federal marijuana enforcement policy.
In the memorandum, Attorney General Sessions directed all U.S. Attorneys “to enforce the laws enacted by Congress and to follow well-established principles when pursuing prosecutions related to marijuana activities,” the DOJ said in a news release.
"It is the mission of the Department of Justice to enforce the laws of the United States, and the previous issuance of guidance undermines the rule of law and the ability of our local, state, tribal, and federal law enforcement partners to carry out this mission," said Sessions in the news release.
The memo on federal marijuana enforcement “simply directs all U.S. Attorneys to use previously established prosecutorial principles that provide them all the necessary tools to disrupt criminal organizations, tackle the growing drug crisis, and thwart violent crime across our country," he said.
Association E&O conference includes session on cannabis and load growth
The American Public Power Association's Engineering and Operations Technical Conference, which will take place from April 29 to May 2 in Raleigh, N.C., includes a session where attendees will learn how SMUD is working with growers to manage cannabis-related load growth while reducing demand from lighting, controls, air conditioning and humidity management. Jim Parks, SMUD's Director of Energy Research & Development, is scheduled to speak at the E&O conference session.
