How can Cannabis growers manage their energy costs

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High energy prices are a threat to cannabis growers everywhere. Unfortunately, high prices are likely to be here to stay as cannabis prices continue to fall.

For those operating at the profit margin, energy costs can be the difference between success and failure. The good news is that most farmers can prepare for the worst and come out in a better place.

The perfect storm and energy prices

Electricity prices across the United States have been trending upward in recent years. There are several factors driving these positions. These include aging grid infrastructure that requires expensive upgrades, geopolitical shocks to energy supplies, and extreme weather events that overwhelm power systems.

Supply Chain disruptions have also changed the cost of energy production equipment and materials. Meanwhile, the increase in demand from data centers, the adoption of electric vehicles and the growth of industries have succeeded in fighting for generational skills in many regions.

Countries with regulated cannabis markets also often suffer from high energy prices. For example, the Northeast consistently has the highest energy prices in the nation, often exceeding 20 cents per kilowatt hour.

California faces similar high costs due to wildfire costs, renewable energy mandates and transmission investments. Industry experts predict electricity prices will remain elevated for the foreseeable future – creating challenges for the most active industries.

Why rising electricity costs are important to cannabis growers

An indoor greenhouse is among the most energy-efficient agricultural practices.

Growers can use between 2000-5,000 Kilowatt-hours per finished pound. In total, growing cannabis accounts for up to 1% of US electricity consumption, or $11 billion a year, according to some estimates. This widespread use arises from the need to create optimal growing conditions in controlled environments.

Complex lighting systems often account for about 40% of total electricity consumption. Cannabis plants need intense, full candlelight for 12-18 hours every day depending on their stage of growth. Climate control and Filtration Technologies that work continuously throughout the growing cycle consume another 40% of electricity.

In all, electricity costs can represent 25% or more of total production costs. In high power markets such as California or the Northeast, energy costs can reach $300 to $500 for $500 for $500 for $500 for $500 for $500 for $500 for $500 for $500 for $500 elsewhere given the ongoing pressure on many cannabis markets.

The combination of rising electricity costs and falling cannabis prices threatens the viability of many businesses. Farmers who once absorbed high energy costs at the price of prices now find themselves in vulnerable markets where operational efficiency directly affects surpluses.

This economic pressure forces farmers to examine all aspects of their energy consumption and to seek new solutions to reduce consumption without compromising productivity without compromising productivity without compromising productivity without compromising.

What can cannabis businesses do about it

But the level of energy balance doesn’t have to end your business. Unlike other business threats, electricity price hikes are highly predictable, and operators can take precautionary measures to reduce their exposure to price fluctuations.

And even those late to the game can still take meaningful action.

First, businesses in organized markets can discuss energy values.

In the Northeast, mid-Atlantic, and parts of the Midwest, businesses can request bids from multiple energy providers rather than accept the local default rate. This competitive market often presents lower prices, more charging structures, and opportunities for renewable energy.

National energy retailers such as Opoint Energy, of Dallas, also work directly with operators to analyze their patterns, reduce costs, or price reductions, and some integrations – and to request proposals from competitive suppliers.

Positions have successfully reduced their electricity costs by 10-20% this way. Others have been able to lock in fixed rates that provide critical budget certainty during times of market volatility.

All operators must understand their energy consumption patterns.

Farmers should pay attention to whether and how their land draws more energy. The local utility must be able to provide 15-minute energy usage data to reflect this. The next step is to identify machines that go down or shut down during Peak System.

According to Michael Gillespie of Gillie Consulting, one Massachusetts plant has used energy-saving techniques that have been used to reduce energy demand by $500,000 per year.

Operators must also investigate their technical performance.

If the farm is older than six months, there is a good chance that it is already facing technical challenges. Many institutions for three years or more have serious problems. Because of this, many growers spend too much time playing WHAC-A-mole with their plant, chasing signs of failure instead of following their masterpiece.

Helpfully, a thorough inspection of a cannabis grow facility doesn’t have to be intrusive or expensive.

According to Cannadiliainence, a service offered jointly by a group of weather services and consulting firms, the return on investment in technology testing can be surprising. Many of the interventions they recommend are more efficient to use and can increase revenue while reducing energy use.

Farmers must also replace or upgrade equipment.

All grow room equipment will eventually wear out and need to be replaced. In some cases, operators may want to replace underperforming equipment. Fortunately, utilities in many cities in the US and Canada offer effective energy efficiency incentives to help offset the costs of upgrading to more efficient HVAC and lighting.

We at the climate team regularly see resources that offer six incentives to growers, sometimes representing 50% or more of their total development costs.

The takeaway

Farmers are well positioned for the next decade by those who understand how their energy systems work, monitor performance, and make data-backed decisions.

Rising energy prices may be inevitable, but their impact should not be.

Sam Milton is the founder of the Climate Services Group, a consultancy that provides Energy and Sustainability services to the CEA industry by lighting your growing system.

Jim Kordoban is the founding CEO of Oven Point Energy, an energy retailer that brings consulting expertise in the Market Information Age with deep industry knowledge.