Cutting Costs in Cultivating Crops | How Energy Efficiency is the Key to Profitability

Cutting Costs in Cultivating Crops | How Energy Efficiency is the Key to Profitability

 

As the Missouri cannabis industry transitions from an eventful summer into a busy fall, businesses are looking to the future by monitoring the trends in more mature cannabis markets. One common pattern observed in states such as Colorado, is declining wholesale prices coupled with increasing competition, which together put pressure on businesses to reduce operating costs in order to remain viable.

In a challenging economy, operating cost management commands an even higher priority and can make the difference in your business’s survival. Understanding your costs, knowing where to make the right changes and focusing on long-term savings can be difficult and vary depending on if you’re a growth facility, warehouse or dispensary. But when it comes to the industry’s greatest cost-saving opportunity, the target is clear; reducing energy expenses can be the difference in keeping your doors open.

Opportunities

Lighting

Energy costs for indoor agriculture facilities can account for up to 50% of a business’s operating costs. For a typical 85,000 sq ft. cultivation center, energy costs may exceed $850,000 annually, with lighting and HVAC representing the vast majority of energy usage. These technologies are an easy place to start when you look at how to reduce your energy costs.

Despite the fact that LED lighting technology has seen significant quality improvements and cost reductions over the past several years, many facilities are still using (and are even currently designed new with) high intensity discharge (HID) lighting options, including metal halide and high-pressure sodium.

When properly incorporated into the facility design, transitioning from these older technologies to LED fixtures can reduce lighting energy usage by roughly 40%, with some newer LED products offering superior dimming capabilities and flexible choices of spectrum, which can even improve crop quality. For dispensaries and office locations, LEDs offer a more pleasant light for employees and customers. Other advantages include: up to 200% longer lamp life, reduction in maintenance costs, and lowered risk of crop contamination upon breakage, to name a few.

LED lighting is a great first step into energy efficiency because the reduced heat given off by these systems, as opposed to HID, often allows building owners to downsize the HVAC equipment capacity, further reducing energy use and cost.

HVAC

Your product’s quality depends on your cultivation HVAC and dehumidification systems being well-designed and operated. Fungus, mold, pest and disease issues can arise as a result of improper indoor environmental conditions, but there are several strategies for energy use reduction which also offer a greater degree of control over indoor air conditions for cultivators.

For example, opting for centralized dehumidification systems over standalone plug-in dehumidifiers can better protect against harmful spikes in humidity and reduce operating costs. Further, these systems can be downsized if designed to include energy recovery from exhaust air; similar energy-recovery strategies can be applied to optimize chiller operation. These are just a few of many strategies to achieve lower operating costs for HVAC systems, while maintaining product quality and employee and customer comfort.

   

Resources

Given the many benefits of energy-efficient equipment and use reduction strategies, you might ask, why are they so under-utilized? Why is the most efficient choice not industry standard? Ultimately, it boils down to two main obstacles: cost and complexity. In Missouri, fortunately, there are resources available to help you overcome these challenges and achieve significant reductions in energy costs.

While nonprofit organizations like the Resource Innovation Institute provide free, peer-reviewed best practice guides to promoting resource efficiency in the cannabis industry, there are also new private companies springing up with similar offerings. However, your greatest resource for identifying, installing and (most importantly) affording energy efficiency solutions will be utility incentive programs.

Several co-ops, municipal and investor-owned utilities throughout the state offer programs and financial incentives to help businesses reduce their energy costs. With many facilities locating in the Ameren Missouri territory, we’ll focus on Ameren Missouri’s BizSavers® program and Economic Development Incentives.

The BizSavers program addresses the cost concern by offering incentives for your business to go beyond the minimum efficient equipment and install higher-efficiency technologies than you would otherwise be able to afford, helping you reduce energy use and leading to long-term energy and cost savings. In exchange, Ameren Missouri reduces grid stress, achieves better peak demand reliability and reduces the need for future power plants, creating a true win-win for both parties. Incentives are available for lighting and HVAC equipment, as well as virtually any energy-saving project. Both new and existing facilities are eligible to participate.

The program not only employs energy efficiency experts and HVAC specialists to help you manage the calculations and determine the best opportunities for you to take advantage of, they work with and train contractors in the service territory to ensure you get qualified help purchasing and installing efficient equipment. Working with one of these trained contractors reduces project complexity and puts your business on a path to greater profitability. The BizSavers program has been operating for more than 12 years and has helped thousands of businesses reduce their costs.

Take, for example, a cultivation facility currently being constructed in the St. Louis area. For this customer’s roughly 60,000 sq ft facility, investments in high-efficiency lighting and HVAC equipment were expected to cost over $2.5 million. Though this equipment was projected to save the customer nearly a half a million dollars annually in operating costs (as opposed to minimum-efficiency systems), it was difficult to justify the investment with a payback period nearing 6 years. The incentive offered by the BizSavers program reduced the estimated payback to just over 1 year, making it much simpler for the customer to decide to save nearly 40% annually on energy costs.

For new facilities, Ameren Missouri offers Economic Development Incentives to customers whose electric usage meets specific qualifications. These businesses receive an average 40% discount during their first five years of operation, which further supports the customers’ ability to invest in technologies that will reduce operating costs in the long term.

Again, these are just two of the many utility incentive programs offered in Missouri; reach out to your electric provider and dig into freely available, peer-reviewed research to find other trusted resources for mitigating energy costs. By focusing on efficiency and managing your energy use, you can more adequately weather difficult economic conditions and come out the other side ready to thrive.

To find more information on the Ameren BizSavers program, visit AmerenMissouri.com/BizSavers. The program’s business development representatives can direct you to other resources mentioned in this article.