Microgrids for the Cannabis Industry: Solving the Energy Hog Problem

Microgrids for the cannabis industry could solve the industry’s energy hog problem — and help utilities grappling with increases in demand in states where cannabis is legal.

Microgrids for the Cannabis Industry

Microgrids for the cannabis industry: The solution to energy hogging by grow operations?

That’s the word from Timothy Hade, co-founder and CEO of Scale Energy, a new company that looked at numerous industries before opting to focus on the cannabis industry for its hybrid microgrids, which combine solar, storage and combined heat and power (CHP).

With cannabis now legal in 29 states, and much of the product grown inside, growers are using so much energy they’ve sparked outages in a few areas — in Denver and Portland, for example, he said.

While energy costs make up about one to four percent of total operating costs in hospitals, for example, they’re a much bigger portion of a cannabis grow operation’s costs, coming in at 20 to 40 percent of total operating costs, said Hade.

“We were looking for a long time for an industry that had a big portion of its operating budget tied up in energy costs,”  he said. In addition, Scale Energy was searching for industries that would be well served by CHP.

“In the cannabis industry, we saw an amazing opportunity for microgrids. The technical characteristics are almost perfect,” said Hade. The industry has large and pretty constant electric and thermal loads. In addition, many grow operations are located outside of urban centers, where the company can stage equipment without large custom installation costs, he said.

What’s more, cannabis operations can benefit from microgrids because they can island from the utility during an outage. That’s critical because crops will begin to suffer after being without power for 24 to 48 hours.

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And cannabis is a nice market for an independent company like Scale Energy because there’s little competition from big microgrid players who don’t want to get involved in an industry that’s illegal at the federal level, he said.

“It’s more for independent companies like us. Big companies like GE and Caterpillar won’t get involved in this because they are tied up in federal procurement contracts,” said Hade.

Utilities, on the other hand, can’t help but be involved in the industry. They’re seeing demand increase in legal states.

“In Colorado, Excel, the biggest utility, ran into some struggles with how to deal with the load growth,” said Hade. “Interestingly enough, the traditional way a utility deals with a problem like this is to call the DOE.”

But because of marijuana’s illegal status at the federal level, the Department of Energy (DOE) can’t help the utilities, he noted.

“The DOE won’t touch this; utilities are struggling with this but don’t have a clear-cut methodology for how they will deal with this challenge,” said Hade.

Not all states are sitting around waiting for federal leadership on this issue. The Energy Trust of Oregon has taken action to help control the runaway energy usage. It will work with growers to develop custom ways of reducing energy costs, according to the organization’s website. For example, the Energy Trust provides technical studies to identify energy efficiency options for HVAC and other projects. It also offers cash incentives for energy efficient equipment in grow operations.

First microgrids for the cannabis industry this year

Scale Energy has a few test projects in the pipeline that are expected to be commissioned by the end of 2017, said Hade. They range in size from 250 kW to 1.5 MW. The company is seeing cannabis operations as large as 1 million square feet, he said.

Scale Energy wants to standardize its offerings as much as possible, noted Hade.

“One of the core pieces of our philosophy is trying to build a menu of microgrid components that can be selected for each job without requiring customization,” he said.

The company aims to lower its customers’ capital costs with operating leases and power purchase agreements, Hade said. For example, Scale Energy might own the equipment and sell the kilowatt hours generated. Or the facility owner might own the microgrid equipment, but pay a monthly lease, like a car payment. In this case, Scale would offer performance guarantees.

Cannabis growing operations would likely see their energy costs drop by 20 to 25 percent with the microgrids, he said.

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What’s your take on using microgrids for the cannabis industry? Post your comments below or on our LinkedIn Group, Microgrid Knowledge.

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Comments

  1. L. Stout-Saunders says:

    Can a third party investor claim ITC?

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  3. […] some struggles with the load growth,” Tim Hade co-founder and COO of Scale Energy said in Microgrid Knowledge. “Interestingly, the traditional way a utility deals with problems like this is to call the […]

  4. […] some struggles with the load growth,” Tim Hade co-founder and COO of Scale Energy said in Microgrid Knowledge. “Interestingly, the traditional way a utility deals with problems like this is to call the […]

  5. […] along with profit margins. They have been featured in numerous media reports, including newspapers, magazines, radio interviews, and technical […]

  6. […] along with profit margins. They have been featured in numerous media reports, including newspapers, magazines, radio interviews, and technical […]

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