How Cannabis Operations Can Maximize the Benefits of Utility Incentive Programs and Energy Rebates

by | Dec 20, 2017

Written by Jessica McKeil

Jessica McKeil is a cannabis writer and B2B content marketer living in British Columbia, Canada. Her focus on cannabis tech, scientific breakthroughs, and extraction has led to bylines with Cannabis & Tech Today, Terpenes and Testing, Analytical Cannabis, and Grow Mag among others. She is the owner and lead-writer of Sea to Sky Content, which provides content and strategy to the industry’s biggest brands.

Bob Gunn founder of Seinergy initially started exploring the potential of energy rebates for the cannabis industry in his home state of Washington. Already in the energy efficiency business as a data-analyst, the numbers made sense. In 2012, Gunn founded Seinergy, and in 2014 he started applying his expertise to the cannabis market. Bob graciously shared his knowledge in a recent American Cannabis live webcast, hosted by Ellis Smith.

With over 38 successful rebate applications under its belt, Seinergy has contributed to over 20 million annual kWh of approved energy reductions within the cannabis industry thus far; equivalent to outfitting over 7,500 homes with solar panels.

Although legalized to some extent in 29 states across America, the cannabis industry still faces barriers to access the many energy-related rebates. Often, especially in newer markets, utilities are inexperienced and uninformed about the industry. As Gunn explains, in many markets rebates require a bit of technical prowess to uncover, it’s not just a matter of picking up the phone and asking for the cannabis discount. Incentive programs aren’t always clear-cut, and often have to be approached from unique angles, like under the somewhat vague custom commercial or industrial or even agricultural programs.

3 Channels for Savings

Seinergy works through three different avenues to help cannabis operations reap the benefits of utility incentive programs.

1. Rebate Fulfillment:

Seinergy puts together a complete and customized application package for their clients. They take the client from start to finish, including inspections, paperwork, analysis, and payout.

2. Product Leasing Opportunities:

In some markets, Seinergy offers to lease premium equipment on a lease-to-own contract. This eases the headache of the initial investment for their clients, which might be prohibitive for smaller operations, and is only made possible by the security and cash flow enabled by utility energy rebates.

3. Rebate Financing:

Although currently in the beta phase, Seinergy is expanding their service offerings to provide rebate financing under certain circumstances. Considering they have an in-depth understanding of the utility incentive process and are intimately involved from start to finish, lending against the receivable is the logical next step.

resource Innovation Institute (RII), utility incentive programs, energy rebates

Benefits of Utility Incentive Programs

The burden of electricity on a cannabis grow operation is nothing to joke about, which is why the industry is quickly moving away from conventional light setups to entirely LED systems. The initial investment for an LED operation is unsurprisingly quite substantial, but local utilities often already have accessible programs in place. The programs offer efficiency rebates to all industries, making such a financial commitment much more manageable.

In Gunn’s experience, most utilities have programs in place for LEDs. However, it is important to distinguish LEDs that are used for general illumination versus LEDs used to grow plants as different performance criteria will apply. A typical rebate covers roughly 15 to 25 percent of the project cost, or on average about 200 to 400 dollars per light. Some programs offer incentives for upwards of 70 percent, but the industry standard is under 25 percent.

Another common feature of an energy rebate is a cost cap, as in the utility commits to covering a specific percentage of the product costs, up until a certain point. However, even with cost caps, every little bit helps.

How are Energy Rebates Calculated for the Cannabis Industry

No matter the industry, rebates are based on a comparison model. For example, the kilowatt hours of a conventional system versus the savings with an LED system. A typical analysis by Seinergy takes data points on the overall square footage of cannabis cover, overlaid with the data on the kilowatt usage of the old versus new LED lights. Finally, they add another layer – the light schedule (vegetative state into flower state). Once the data is analyzed, they have a full understanding of the energy savings potential of the project.

Most rebates target the annual savings of kilowatt hours, but may also take into account the peak demand or energy used during hours as well. Although kilowatt hours are typically a primary financial driver of the utility bill, many operations fail to appreciate how peak demand–the maximum amount of power used at any one moment–can make up 30 to 50 percent of their power bill and can be managed.

Where are Utility Incentive Programs Accessible?

Seinergy has the most activity in the adult access markets, like Colorado, Oregon, and Gunn’s home state of Washington. However, they have also done business in strictly medical marijuana markets, such as in Canada.

The accessibility of energy efficiency incentives for the cannabis market is always expanding, as the laws shift on a state-by-state basis. The following states have robust energy rebate programs:

  • Colorado
  • Washington
  • Oregon
  • Pennsylvania
  • Maine
  • Nevada

Other states have more limited incentive programs, but still, deserve an honorable mention:

  • California
  • Arizona
  • Arkansas
  • Illinois
  • Hawaii
  • Florida
  • Michigan
  • Maryland
  • Massachusetts
  • Rhode Island

Although Seinergy focuses on its main area of expertise (rebates in relation to lighting), Gunn also touches on some other areas for consideration. For example, switching to an LED system carries with it potential savings on air conditioning and HVAC systems. These indirect energy savings stemming from LED lighting are sometimes approved for consideration by the electric utility during application. The direct savings from investments in high-efficiency HVAC systems  – on top of the indirect savings from the reduced lighting loads – can also yield direct utility funding in most territories.

In addition to energy benefits, switching to LEDs achieves many non-energy benefits including reduced bulb and ballast replacement costs (both labor and materials), reduced hazardous waste from expired bulbs, dimmability, and spectral tuning.

Gunn makes it very clear that moving towards LEDs for any grow operations is financially the smartest course of action. In his opinion, “the economics make it a slam dunk.” By mitigating the initial set-up costs with local utility incentive programs, the long-term financial benefit is clear.