United States: How Mass. Can Prepare For Cannabis Industry Energy Use

State-by-state legalization of the medical and recreational use of marijuana is creating a new  industry in the U.S. that has the potential to rival our largest businesses. However, the growth of  this new industry comes at a cost. In addition to the obvious cultural and financial impacts the  industry will have on Massachusetts, significant environmental impacts should be anticipated. Historically, the illegal status of marijuana has inhibited an understanding  of the potential  impacts of large-scale operations on the environment. The  current emergence of this industry  presents an opportunity for Massachusetts to be a progressive example of best practices and  environmental stewardship.

Data suggests that cannabis is an especially needy crop, requiring high temperatures,  strong   light, highly  fertile  soil and  large volumes  of  water. Indoor cultivation has been found to be  the most energy intensive cultivation method. A 2012 California study showed that indoor cannabis  cultivation was responsible for approximately three percent of the state's electricity use,  equivalent to the electricity consumption of one million California homes - and this was at  a time  when only medical, and not recreational,  marijuana  was legal.

Greenhouse  and  outdoor  cultivation  methods  use  much  less  energy  than indoor growing,  although they  use  more  water  and  can  have  detrimental ecological consequences. A California  report  cited  a 2016 study that  estimated the energy cost differential between indoor versus  greenhouse versus outdoor cultivation  to  be  78 to  1 to 0.

An Act to Ensure Safe Access to Marijuana, signed into law by Governor Baker July 28th, was built  upon a voter-approved ballot initiative legalizing the recreational use of marijuana in the  Commonwealth. The bill includes a state and local taxation system, a 2-tiered local option  arrangement to authorize cannabis establishments and creation of the Cannabis Control Commission  (CCC), an independent commission charged with the promulgation of regulations that cover nearly  every aspect of the  nascent industry.

The Massachusetts law allows local municipalities to individually determine where, when and how,  marijuana licensees may operate. However, the Massachusetts CCC's regulations are required to  address "energy and environmental standards for licensure" for marijuana establishments that  cultivate  or manufacture product.

Additionally, the CCC must establish a working group to provide recommendations on ways to reduce  energy and water use in the industry, mitigate environmental impacts, conduct annual energy audits  and identify best practices to ensure compliance with the state's energy efficiency goals and to  ameliorate the potential harm to the environment.

Pursuant to these directives in the enabling statute, the CCC would be wise to take note of the  practices adopted in pioneering states such as Colorado and Oregon.

The city of Boulder, Colorado, requires commercial cannabis growers to either offset increased  electricity use with local renewable energy sources, or to pay a 2.16-cent charge per kWh. Such  fees are funneled into the Boulder Energy Impact Offset Fund, the purpose of which is to encourage  the use of best practices in energy use in marijuana cultivation, in addition to funding carbon  offset projects. Additionally, the fund serves to collect data on energy use and to assist in  developing more efficient lighting and ventilation  systems as the industry grows.

In another example, Oregon requires any applicant for a recreational marijuana license to submit a  report on the estimated electricity and water consumption anticipated for their operations. To  assist in this endeavor, Oregon created an energy use calculator that can assist applicants in more  accurately estimating energy use needed for indoor cultivation. The calculator, which is accessible  online, utilizes total grow area, total plant amount, the type of energy use equipment and actual  energy use if known, to calculate an estimate of the monthly and annual energy use based on a  typical 12-18 hour per day light  operation.

Requiring an energy use report as part of the application for a license encourages growers to  consider their energy use profile, and may inspire them to consider use of energy-saving mechanisms  in their operations. It should be noted that other states have provided financing opportunities to  enable marijuana growers to invest in renewable energy and energy efficiency.

Even if best practices are identified and implemented, the need to address the enormous consumption of energy presents an opportunity for the clean-tech industry.  Although the  uncertainty in the market stemming from the federal ban has stifled innovation due to a lack of  financing, the growing acceptance of cannabis legalization has resulted in a problem of sufficient  size that cries out for a solution.

Various technologies are being developed that may help to meet the challenge. For example, LED  technology has advanced rapidly over the last decade; use of this technology can reduce the need  for cooling and dehumidification. Solar energy, greenhouses, humidification systems and microgrids  are also technologies that are poised for growth.

With  an  eye  on  energy  efficiency  in this  space, utility  companies  in  Massachusetts  have   stepped forward  as partners  to  the  burgeoning  industry.  Fran  Boucher,  National  Grid's   energy  efficiency program  manager,  stated  at  the  World  Cannabis  Congress  and  Business   Exposition  in  Boston  this year that utility companies can offer incentives for marijuana  businesses that design or upgrade their facilities  to  be  more  energy efficient.

As long as the grower installs the efficient systems and uses them as agreed, the utility company  will provide payments proportional to the savings. Boucher made clear that there is no upper limit  to the incentives, stating that projects as small as installing 10 LED lights could be eligible.

With a deadline for pot shops to open by July 1, 2018, the CCC is on a short timeline to craft  regulations. The five CCC commissioners have been appointed and are hosting listening sessions  across the Commonwealth to elicit public feedback on industry issues.

The chair, selected by Treasurer Goldberg, is Steve Hoffman, a retired business executive and Bain  and Company partner. Governor Baker tapped Senator Jennifer Flanagan for her background in mental  health and substance misuse. Attorney General Healey appointed Britte McBride, who worked for the  Executive Office of Public Safety and Security and for the Attorney General's Office. Kay  Doyle,  who had been working in the medical marijuana program at the Department of Public Health, and  Shaleen Title, co-founder of the cannabis staffing firm THC, were selected by a majority of the  above three constitutional officers.

The 25-member advisory board members were also announced - a group tasked with assisting the CCC to  draft regulations and guidelines for the industry.

We will closely monitor the CCC's progress on how to address energy consumption, and will periodically report on developments in this area as regulations are  crafted.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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David L. O'Connor
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