Cannabis And Renewable Energy In New York: Delving Into The Weeds Of A Budding Industry – Energy and Natural Resources – United States – Mondaq News Alerts

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New York’s recent legalization of recreational marijuana for
adult use has set off a flurry of entrepreneurial activity as
businesses seek to establish a foothold in the State’s new and
lucrative market. Renewable energy, energy storage and other
technologies can help growers not only minimize their electricity
bills – a substantial operation expense for the typical
indoor farm – but also give them a leg up in the State’s
licensing process. This blog post outlines the energy challenges
posed by the nascent cannabis industry, as well as cost-effective
opportunities that businesses can seize and that energy and
efficiency resource providers can offer. These measures can make
cannabis operations more economically competitive, environmentally
friendly, and potentially improve their license applications.

I. Environmental Impacts of Cannabis


Due to their fans, lights, and 24/7 operation, indoor cannabis
farms and manufacturing facilities consume a lot of electricity.
This not only imposes a significant operating cost on individual
growers through their monthly electricity bills, but can also
strain the local utility’s distribution grid. For instance,
according to the Northwest Power and Conservation Council, indoor
commercial cannabis production can consume 2,000 to 3,000-kilowatt
hours (kWh) of energy per pound of product.

Legalization of marijuana in other States sheds light on what
New York’s electricity sector can expect as the cannabis
industry takes root. Following legalization in Colorado,
electricity use from cannabis cultivation and infused products
to about 4% of Denver’s total electricity consumption
in 2018. Significant additional load when not addressed can lead to
failures in the electric system. Pacific Power, the local utility
for Portland, Oregon,
that marijuana grow houses triggered seven blackouts
during the summer after recreational marijuana was legalized.

Harmonizing the growth of New York’s cannabis industry with
sustainable practices is especially important in light of the
State’s ambitious and legally-binding decarbonization goals.
The Climate Leadership and Community Protection Act of 2019 (CLCPA)
requires New York to reduce greenhouse gas emissions 40 percent
below 1990 levels by 2030 and 85 percent by 2050. The CLCPA also
mandates 185 Trillion BTUs in end-use savings in the building and
industrial sector by 2025. Integrating a new energy-hungry sector
into the State’s existing economy will increase the challenge
of meeting these benchmarks.

II. Permitting Advantages for Climate Resilient


For certain businesses, developing a carbon-friendly cannabis
operation may be necessary to operate in New York as a threshold

The Marihuana Regulation and Taxation Act of 2021
(“Act”) established a Cannabis Control Board
(“Board”) and directed the board to develop regulations
for granting or denying initial adult-use cannabis licenses. Under
the Act, the Board, in consultation with the New York State
Department of Agriculture and Markets and the Department of
Environmental Conservation, “shall promulgate necessary rules
and regulations governing the safe production of cannabis,
including environmental and energy standards and restrictions on
the use of pesticides and best practices for water and energy

Section 64 of the Act sets forth several climate-related
selection criteria that the Board should consider in determining
whether to grant a license. One such criterion is the
applicant’s “ability to increase climate resiliency and
minimize or eliminate adverse environmental impacts, including but
not limited to water usage, energy usage, carbon emissions, waste,
pollutants, harmful chemicals and single use plastics.”
Additionally, if the application is for an adult-use cultivator or
processor license, the Board must consider “the environmental
and energy impact, including compliance with energy standards, of
the facility to be licensed[.]”

And these considerations are not new or unique to New York. For
instance, Georgia, who hosted one of the more recent competitive
state cannabis licensing rounds, specifically sought information
associated with the applicant’s energy plan, water use plan,
and environmental impact plan. These sections, seeking similar
overarching criteria as identified in the Act, affirmatively
required creative plans as part of the competitive application
process. In short, an astute and up-to-date environmental plan that
takes into account state renewal energy policies is not only a good
business practice, but more so, often the difference between a
winning and losing competitive cannabis licensing application.

Accordingly, New York applicants that can demonstrate that their
business will be conducted with minimal climate impacts, including
those attributable to the electricity consumption, will be better
positioned to compete in the upcoming New York licensing

III. Renewable Technology Opportunities


Fortunately, New York provides many ways to facilitate the
adoption of climate-friendly measures for existing and
yet-to-be-constructed cannabis facilities. These services can be
provided by the grower, or the many third-party contractors that
currently operate in the renewable energy sector. Many of these
options are complementary and can be combined to create a
comprehensive electricity management strategy.

  • Outdoor Cultivation: Post-prohibition cannabis
    cultivators should consider whether the energy efficiency benefits
    of moving some or all of their growing operations outdoors would
    offset other costs associated with that model. Minimizing the
    amount of grow lights, cooling fans, and other equipment with high
    load requirements could go a long way toward reducing the overall
    carbon footprint associated with the project. As some researchers

    • “Even at ostensibly high energy efficiencies and use of
      renewable energy, indoor cultivation “optimizes the
      suboptimal” and cannibalizes renewable energy infrastructure
      developed for other purposes, which is untenable in a
      carbon-constrained world. Outdoor cultivation—which has
      sufficed for millennia and could meet all U.S. demand with only
      0.01% of current farmland—is the most technologically
      elegant, sustainable, ethical, and economically viable approach for
      minimizing the rising energy and environmental burden of cannabis

  • On-site Solar PV: New York offers many
    incentives to install solar photovoltaic (PV) panels on a
    commercial site. The New York-Sun program, administered by the New
    York Energy Research and Development Authority (NYSERDA), offers
    certain upfront dollar-per-watt incentives based on the size and
    location of the solar system. Under the State’s net energy
    metering and value of energy resources (VDER) tariffs, system
    owners can receive utility bill credits for injecting clean energy
    into the local distribution grid at times when the solar panels are
    producing more energy than the facility is consuming. This is in
    addition to property tax exemptions available under Real Property
    Tax Law or through the local Industrial Development Authority, as
    well as federal investment tax credits.

  • On-site Energy Storage: Energy storage
    systems, either standalone or co-located with solar PV, can also
    reduce electricity costs. Like solar, energy storage systems can be
    compensated under VDER for grid-injections and are eligible for
    NYSERDA installation incentives depending on their size and
    location. Additionally, energy storage can be used to shave peak
    demand charges, or engage in energy arbitrage – charging the
    battery when electricity is cheap and discharging when it is
    expensive. Such systems may also increase the ability of customers
    to participate in demand response programs offered by the utility
    or to offer such products themselves in the wholesale markets
    through an aggregator.

  • Community Distributed Generation: If on-site
    solar or energy storage is not an option, commercial electricity
    customers can subscribe to an offsite community distributed
    generation (CDG) project — New York’s version of
    community solar. A CDG project generates credits, which are then
    allocated to a customer’s utility electric bill. Customers
    realize savings either by purchasing these bill credits directly
    from the project owner at a discount, or having the utility apply
    that discount itself (the “net credit”) directly to
    customer’s utility bill. Up to forty percent of a single CDG
    project’s offtake can go to large customers, defined as having
    more than 25kW of electricity demand.

  • Remote Crediting: Recent policy changes have
    made remote crediting an increasingly viable alternative to CDG
    subscriptions in New York. The program is similar to the
    State’s CDG program except that remote credited offsite solar
    projects can be fully subscribed with large commercial customers.
    CDG projects have typically proliferated in New York due to
    CDG-specific incentives in the VDER tariff which make them more
    lucrative. However, as those incentives decline or expire, remote
    crediting may see a greater market share of the offsite distributed
    solar market.

  • Commercial PACE Loans: Many municipalities in
    New York offer property assessed clean energy financing to fund
    energy-related improvements in commercially owned buildings
    (C-PACE). For many buildings, C-PACE is a low cost, long-term
    alternative to traditional loans to fund clean energy projects,
    thereby decreasing the financing costs of such measures. Enacted in
    5-L of the General Municipal Law
    , New York’s C-PACE program
    allows third-party capital providers offer direct funding to the
    property owner for up to 100% of the cost of the energy
    improvements. The loan is secured by a special assessment on the
    property, a “benefit assessment lien”, and is repayable
    by the property owner in installment payments over a term not to
    exceed the useful life of the improvements. More information on
    Open C-PACE, including a list of participating
    , can be found on the Energy Improvement
    Corporation’s website.

  • Local Law 97 Compliance: Building owners in
    New York City are subject to Local Law 97, which sets increasingly
    stringent limits on carbon emissions in 2024 and 2030 for buildings
    with more than 25,000 square feet. Indoor farms located within the
    five boroughs that consume significant amounts of electricity could
    end up paying hefty compliance fees under the local law should they
    exceed their emission allowance. Building owners can comply with
    the law by implementing energy efficiency measures to reduce the
    carbon profile of the building, installing distributed energy
    resources like solar and storage, and/or purchasing renewable
    energy credits or carbon offsets.

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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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