8 Tips to Maximize Cannabis Cultivation Energy Efficiency Rebates

When it comes to energy-efficient systems like LED lighting and purpose-built integrated HVAC-D, cost can often be the hurdle preventing cannabis companies from adopting them. In Cannabis Business Times’ 2023 State of the Cannabis Lighting Market Report, made possible with support from Fluence, a quarter of cannabis growers who do not plan to use LEDs in the flowering cycle in the next 12 months noted that “payback/ROI is too long” as a barrier preventing them from installing these fixtures.

Despite the increasing number of utility providers offering incentive programs and grants that can discount or even pay off those upgrades, more than half (56%) of the study’s participants reported that they did not research rebates, with nearly a third of those (32%) indicating they have never have heard of these programs.

Make no mistake, utilities want to partner with cannabis and CEA operations to increase the adoption of high-efficiency systems. More and more of these programs target systems beyond lighting, with some going so far as to offer incentives for (provable) general efficiency and resource-use improvements, making now the best time to begin working on these project plans.

To help guide cannabis growers on their efficiency rebate journey, Resource Innovation Institute (RII) offers these tips and insights on getting the most out of these utility incentive programs.

1. Start with prescriptive programs.

Incentives and rebate programs can broadly be categorized into two buckets: prescriptive and custom. Prescriptive programs often will target energy-saving measures or technologies with predefined incentive amounts–i.e., a program that offers a $250 discount per high-efficiency LED lighting fixture purchased and installed.

These programs are typically funded by the energy efficiency charges on everyone’s utility bill—mandated by states to fund efficiency programs. In some cases, the individual utility is responsible for paying back these monies through incentives, leading to variations of rebate programs across utilities within the same state (i.e. Michigan), and in others, the funds are centralized into one statewide efficiency program where they are uniform across participating utilities, such as New Jersey’s incentive and rebate program, explains Mikhail Sagal, a member of RII’s lighting working group technical advisory council. “Utilities either opt-in or they don't, but [New Jersey] has a managed program, and everybody's incentive is exactly the same,” he says.

Prescriptive programs generally will have straightforward requirements outlined in the program’s details. Customers can receive incentives by implementing the specified measures without the need for complex calculations or detailed performance assessments (although that may not always be the case).

Looking into the availability of these programs in your state can also help identify priority areas to target in your operation. Some states and utilities just starting to implement incentives for cannabis growers or CEA operations may still be offering great rebates for installing LED fixtures, while others may be moving to look at water circularity or automation systems and controls to further meet energy targets.

2. Consider custom programs.

Custom incentive programs, as the name might suggest, are for more unique projects that do not fit the scope of prescriptive programs but that can still offer energy-efficiency improvements. These projects are often tailored to the specific needs and circumstances of the customer and typically will require a more detailed analysis of the energy savings potential of the proposed project. This may involve energy modeling, engineering studies, and performance assessments.

From an HVAC-D system perspective, custom rebates are often the only practical path forward. Purpose-designed, integrated HVAC-D systems can save up to 40% in energy compared to standalone equipment, says Chip Seidel, Director of Indoor Agriculture at RII member Desert Aire. “In nearly all cases, if a power reduction can be achieved by utilizing more efficient HVAC-D equipment, it can qualify under a custom rebate program,” he says. “Facility owners should work with their equipment suppliers to help facilitate the custom rebates. In many cases, there is money available for increased efficiency.”

“In general, custom programs require more effort on the part of the utility customer,” says Jeannie Sikora, an energy engineer at CLEAResult, a North American provider of emission-reducing energy solutions. “But we can get to deeper levels of savings and higher incentives, so it can often be worth it. Plus, you’ll be working with an energy engineer who may be able to spot issues. So, the extra effort to extract data from your growing software can pay off.”

RELATED: 8 Tips to Reap the LED Rebate

While they can require more benchmarking and verification work (although unusual, some custom incentives programs can take more than a year of work before paying out), they generally also have greater returns as they aim to maximize resource efficiency across multiple facility areas.

“Custom incentives can also combine energy rebate measures from a utility into a larger scope,” Sagal says. “Advanced lighting controls, coupled with LED lighting, energy monitoring, and HVAC and dehumidification systems that verifiably deliver greater efficiencies, may qualify for greater incentives.”

3. Weigh your rebate options.

Efficiency program rebates and incentives can take many different forms, offering different benefits and different payout timelines. Understanding the program’s incentive structure can help facility operators prioritize applications and budget appropriately.

For example, a rebate isn’t going to directly reduce the purchase cost like an over-the-counter (OTC) discount from distributors. OTC discounts are becoming more popular. “It’s convenient for the customer,” Sikora says, “because there's no paperwork except for bringing your utility bill to the sales counter.”

4. Be patient.

In his time working with cannabis companies to help them maximize energy-efficiency program benefits, Sagal highlights an important point that growers must be aware of how these incentives work: they do not pay growers upfront. For operators eager to get systems installed to reduce their ongoing operating expenses, incentives are sometimes overlooked. “They're doing so many things at once they don't have time to investigate, be bothered, or go through the pre-application phase [with it,]” Sagal says, meaning tens of thousands of dollars—and sometimes much more—can be left on the table.

Depending on the provider, some approval and pre-approval processes can take 60 days or more. This waiting period can leave growers in limbo, unsure whether they can move forward with the high-efficiency product purchase.

5. Know who your utility provider is.

As mentioned, incentive programs can vary across markets and utility providers. Knowing who provides your facility’s power is crucial to successfully identifying potential incentives. Larger utilities typically have more funds available for efficiency programs.

As an example, “Xcel Energy in Colorado and Minnesota offers high incentives for LED adoption and efficiency programs, while other utilities within those states may not,” Sagal shares. Differences between utilities may also affect incentive programs. Compared to private/public utilities, Sagal says, municipal power providers may offer lower rates to their customers but without the availability of lucrative rebate incentives.

“In some situations, there is value in staging the on-off sequence to avoid power spikes,” Seidel notes. “Many areas also provide incentives for off-peak power usage.”

“If you have questions on rebate programs or options, reach out to a local rebate specialist,” Sagal says. Increasingly, product suppliers are offering rebate services to customers to help with the application process, as well. “It is important to ensure you navigate all potential incentive offers.”

6. Invest the research time when operating in multiple markets.

Efficiency benchmarking standards, efficiency target priorities and goals, and rebate and incentive program operations may vary across states. For example, Michigan is one of the more generous markets when it comes to incentives Seidel says. “It is well worth exploring options on a facility-by-facility basis to ensure no opportunities to invest in the best, most efficient equipment are missed,” he adds.

Many states will only offer rebates if the fixtures have yet to be purchased. This makes it important for growers to research every state and utility provider program in the jurisdictions in which they operate.

Additionally, cannabis operators should consider exploring prescriptive programs that target non-cannabis (or even non-CEA) operations, as there can be significant savings for which cannabis companies may qualify.

7. Look beyond lighting.

LED rebates are often the most common and most accessible for cannabis cultivation operations. In more mature cannabis markets where efficiency benchmarks are already rising, incentives for LED systems may eventually be phased out. As the industry’s efficiency standards rise, there becomes a point of diminishing efficiency returns for incentive program managers. That said, once prescriptive LED programs are tapped out, cannabis growers can turn their attention to custom projects that offer energy efficiency or productivity benefits.

For example, Sikora is working with a lettuce grower who is looking to supplement the company’s cultivation area with CO₂ to increase yield without increasing energy inputs, she says. “That's a process improvement that if we can get enough data and we can prove that [CO₂ system] is saving energy—that you're producing more with less energy.”

Facility operators can expect HVAC-D system rebates to become increasingly prevalent. In addition to lighting, climate control systems are the major power consumption drivers of any indoor cultivation facility, “so it would make sense that after lighting HVAC-D would be a logical target for rebate policies,” Seidel says.

Advanced automation control systems are another area that can be ripe for custom rebate projects. Syncing lighting systems and environmental control systems can achieve significant energy savings (in addition to improving crop outcomes). These can be especially effective in greenhouse operations where there can be greater variance in the cultivation environment, Sikora says.

“We're seeing a lot of innovation in the use of controls that can increase energy savings, and, in general, incentives are proportional to the amount of energy you're saving,” she details.

Other areas in which she is seeing innovation are airflow optimization and water circularity. These types of projects “generally won't have big incentives like horticultural lighting usually does,” Sikora notes. “But there’s the opportunity, as long as the grower is willing to put in the effort, to get incentives for innovation.”

RELATED: 3 Considerations to Improve Cultivation Efficiencies

8. Always be tracking.

“It's important for growers to pay attention to the data, not just benchmarks, but to analyze those trends over time,” Sikora says. “Tracking key performance indicators over time can really help you figure out when there are issues that should be addressed.” That’s one of the benefits of working with utility program energy engineers, she adds.

RII’s PowerScore platform can help facility operators measure and verify facility efficiency and productivity by revealing operational key performance indicators of facilities and crops to compare against key performance targets and see year-over-year trends. That said, some metrics can be tracked in-house. For example, measuring product yield over energy use (e.g. kilowatt-hours per pound) can help growers track how higher-efficiency practices can have real-world impact.

Some programs (especially custom ones) may require historical data for the application to qualify. Others may mandate ongoing data shares to remain eligible. Having a robust and comprehensive data tracking plan is crucial to maintaining an efficient facility, identifying potential areas of improvement, and increasing the opportunities to develop a productive relationship with utility incentive program managers.

Robert Eddy, M.S., is Resource Efficiency Horticulturist with the Resource Innovation Institute.