Welcome to our Ask The Cannabist column. Clearly you have questions about marijuana, be it a legal concern, a health curiosity, a Colorado-centric inquiry or something more far-reaching. Check out our expansive, 100-question Colorado marijuana FAQ first, and if you’re still curious, email your question to Ask The Cannabist at email@example.com.
I’m a long-term advocate of marijuana legalization, but I strongly believe the cannabis industry must, either voluntarily or through regulation, become carbon neutral. Why doesn’t the industry operate entirely on renewable energy? Clearly, with the profits being made this is a reasonable demand. The scientific consensus on climate change is clear — it’s happening, it’s accelerating, and it is resulting in fundamental physical changes to the planet. What is the industry doing to conserve this scarce resource? –Tree Hugger
Hey, Tree Hugger!
This is a great question for the nascent legal industry! Let’s take a look at the energy used in indoor cultivation. To start, Colorado marijuana businesses are complying with newly established laws and regulations by growing primarily indoors. Due to state laws and local ordinances, outdoor growing and utilizing sunlight for necessary energy is largely not an available option in Colorado.
So what’s the impact of growing indoors? A 2013 analysis of energy use in cannabis cultivation commissioned by the Washington State Liquor and Cannabis Board describes marijuana grown indoors as an energy-intensive product requiring about 2,000 kilowatt-hours per pound of product. For comparison, the paper cites electrical usage for aluminum production is around 7 kwh per pound.
In terms of energy use here in Colorado, a recent Denver Post report provides Xcel Energy and City of Denver data regarding marijuana growing. Xcel Energy officials said that in 2014, statewide marijuana cultivation facilities used up to 200 million kwh of electricity.
Comparative data from the article shows an increase in energy usage for Denver grows. City officials said that in 2013, 354 grow facilities in Denver used around 121 million kwh, which is an increase over 2012, in which 351 facilities used 86 million kwh. Marijuana grows in 2013 accounted for 1.85 percent of total electricity consumed in Denver.
For the total energy use within the city, Denver officials stated electrical use has risen 1.2 percent a year and 45 percent of the growth is attributed to marijuana cultivation sites.
The energy used to grow comes from existing energy infrastructure — the power grid — which is powered primarily by fossil fuels like coal. In terms of sustainability, fossil fuel use contributes to the cannabis carbon footprint. A session on industry sustainability at the recent Cannabis Business Summit discussed these issues. Panelist Jonathan Valdman of Forever Flowering Greenhouses, LLC a California-based sustainable agriculture company, mentioned cannabis companies that want to use more renewable energy face a number of obstacles.
In a followup phone call, Valdman confirms that renewable energy is expensive and access to financing for loans for renewable energy systems (or any financing, for that matter) has been a challenge for legal marijuana businesses. Additionally, the length of time for the return on investment is an added risk for many industry executives because of the many uncertainties in marijuana business. Valdman says new investors, from Wall Street to Silicon Valley, are hesitant to make immediate decisions from a conscientious business perspective and are focusing primarily on how to do things cheaper. Regulations have pushed growers into industrial areas, says Valdman, and to be more sustainable, marijuana cultivation needs to be sun grown and treated as an agricultural crop, not an industrial product.
Boulder County recognizes the growing impact of energy consumption on the current power grid and now requires marijuana grows located in unincorporated areas of the county to either offset their usage with renewable energy credits or pay a 2.16-cent charge per kwh that goes to the Boulder County Energy Impact Offset Fund. The funds paid by the growers are used to encourage energy efficient cultivation practices and spur development of efficient lighting and ventilation systems for the rapidly expanding industry, according to Ron Flax, Boulder County sustainability examiner.
Boulder-based marijuana company The Farm has evaluated its energy usage. Devin Liles, vice president of production, describes via email the changes made after the company performed energy monitoring in 2014. The data was gathered with energy gauges placed in two of The Farm’s grow facilities. Readings showed peak load energy use, and Liles says lighting schedules were subsequently adjusted and precisely timed to decrease the spikes in energy use, which resulted in reduced costs. One of the largest changes, according to Liles, was a switch to more efficient lighting, which reduced the energy consumption in the vegetative areas by half.
The profits from marijuana business, as you mentioned, may not be as abundant as they seem for covering the expenses of adapting to renewable energy. Valdman says the general assumption that all marijuana businesses are making a ton of money is inaccurate. Some businesses are making large profits, but it is not standard across the industry, he says. Liles adds that although profit margins are healthy, they are not what people might think because of taxes and costs associated with regulatory compliance. Liles points to 280E in the federal tax code, which disallows certain business expense deductions, effectively taxing marijuana businesses around 50 percent, rather than the typical 39 percent for other businesses. “The costs associated with complying with a maze of state and local regulations are difficult to quantify, but vast,” Liles states. “Translating complex regulations into operational protocols has many direct and indirect costs.”
Valdman says the adult-use cannabis industry is in its infancy and has the potential of being a global leader of sustainability. He says cannabis businesses need to be responsible and look at their carbon footprint, and regulations need to include outdoor cultivation. XO
Updated Sept. 18 at 4:41 p.m. The following corrected information has been added to this article: Previous versions of this story misreported the government entity responsible for the Boulder County Energy Impact Offset Fund. It is overseen by Boulder County.