Harnessing the sun to grow marijuana is not a new idea. Prior to states legalizing marijuana sales, cultivators used solar panels to avoid spikes in their energy consumption, which would potentially give away their locations. In keeping their activities clandestine, they enjoyed the positive side effect of offsetting their energy costs while lowering emissions.
Today, the cannabis cultivation and use prohibition is being eliminated, and the legal marijuana industry is one of the fastest growing markets in Massachusetts. Regulators across the country are beginning to realize the extent of the energy needed for indoor growing facilities. As a result, states such as Massachusetts are requiring cannabis cultivators to implement energy efficiency measures and renewable energy alternatives to offset the high energy demands.
The City of Boulder, Colorado recently implemented an ordinance that requires indoor cannabis cultivators to offset their energy use by utilizing 100% renewable energy. California is considering requiring indoor cultivators to obtain 42% of their energy from renewable sources. In Massachusetts, pursuant to the recently passed Code of Massachusetts Regulations Title 935 (“935 CMR”), the Cannabis Control Commission (the “Commission”) strongly encourages cultivators to consider renewable energy:
- Section 500-040 of 935 CMR provides for a Leadership Ratings Program (“Leadership Ratings”) for cultivators who obtain 100% of their energy usage from renewable sources and label their products as such. Leadership Ratings will be favorably considered in the event that a cultivator is assessed fines or disciplinary actions by the Commission.
- Sections 500-105(1)(p) and (15) require cultivators to follow a set of detailed written operating procedures including the “consideration of opportunities for renewable energy generation.”
- Section 500-120(11)(e) states that if a cultivator is generating 100% of its electricity use from an “onsite clean or renewable resource,” then the energy efficiency measures associated with light power density (“LPD”) and heating ventilation and air condition (“HVAC”) units do not need to be considered.
Solar power is a great option to offset much of an indoor cultivator’s energy demands, reducing energy costs and emissions while fulfilling many of the current regulatory demands for energy usage. So, what are the choices to be made when working with solar power?: a solar facility either onsite or offsite; a ground-mounted or rooftop installation; and a system owned by a host/off-taker or owned by a 3rd party. What about a battery back-up system? Here are some points to consider:
- Onsite vs Offsite Solar:
- Onsite solar allows for an option to install solar behind the meter, directly offsetting the host’s energy consumption. Onsite solar installation complies with Section 500-120(11)(e) of 935 CMR, providing the cultivator with options to meet the energy efficiency measures associated with LPD and HVAC units. Depending on the specifications of the cannabis facility and its location, however, there may be limited options with respect to sizing the solar facility and where it can be located.
- Offsite solar provides more design and size options, and a cultivator can more easily size the system to conform to the energy needs of the cannabis facility. Through distributed generation and Massachusetts’s net metering regulations, the cannabis facility would receive credits from the energy that is produced as a result of the system indirectly offsetting its electricity loads. However, an offsite solar facility would provide the cultivator with fewer options to circumvent required onsite energy efficiency measures.
- Rooftop vs Ground-Mounted Solar:
- Consider a rooftop solar installation for an onsite system where there is underutilized space on the building’s roof. There are commonly fewer costs and less local permitting associated with roof installations because, in most cases, they require significantly less steel than do ground-mounted facilities. However, the rooftop must be structurally capable of holding the solar facility, and the size of the facility is limited to the available space. Nevertheless, depending on the final version of the new Solar Massachusetts Renewable Target (SMART) program, the energy produced by a rooftop solar installation may be valued at a greater price than ground-mounted systems.
- Ground-mounted solar facilities eliminate the structural concerns of rooftop installations and can be sized accordingly; however, the associated municipal permitting and entitlement requirements may be greater. Installation costs can also be higher. Moreover, and depending on the final version of the aforementioned SMART program, the energy produced by ground-mounted systems may not be as valuable as energy produced by rooftop facilities.
- Host/Offtaker Owned vs 3rd Party Owned Solar:
- Owners of cannabis facilities may not be able to take advantage of the existing 30% solar federal investment tax credit (the “ITC”) incentive because federal law does not currently recognize cannabis cultivation as a legal business.
- However, holding entities or 3rd party owners of solar facilities may be able to recognize the ITC, depending upon how the ownership structure is set up.
- Battery Backup vs Generator vs Both:
- Most cultivators agree that there must be some form of backup power associated with an indoor growth facility to avoid a compromised crop in the event of a power outage. Solar battery backup is a cleaner option than a diesel generator and meets regulatory requirements. Depending on the energy demand required by the facility, however, a battery backup system may not be large enough on its own to power the facility completely for any meaningful length of time. The combination of solar power with a battery backup system will keep the system operational, even in the event of a power outage.
In conclusion:
- The Massachusetts solar industry has seen tremendous growth over the last eight years, which has resulted in innovative options for financing, designing, and utilizing solar power.
- Since 2010 and through the first quarter of 2018, the Solar Energy Industries Association (SEIA) has ranked Massachusetts in the top 10 states for solar friendliness in the US. With the enactment of SMART, Massachusetts wants to stay relevant.
- With the legalization of cannabis and Massachusetts creating energy efficiency regulations, conditions are perfect for the integration of these industries, and the subsequent growth of both.
Prince Lobel’s Cannabis Team will be holding a roundtable on the renewable energy regulations for the cannabis industry sometime in the early fall; keep an eye out for the Save-the-Date email. In the meantime, if you have questions about any of the information in this alert, or are looking to offset your energy costs, contribute toward your Leadership Ratings from the Commission, or provide additional revenue toward your operating costs, please contact Adam Braillard, the author of this alert and co-chair of Prince Lobel’s Renewable Energy Group, at 617.456.8153 or abraillard@princelobel.com, or Craig Tateronis, Managing Partner and co-chair of Prince Lobel’s Renewable Energy Group, at 617.456.8021, or ctateronis@princelobel.com.