(Editor’s notice: This story is a part of a recurring sequence of commentaries from professionals related to the cannabis business. Bob Gunn is founding father of Seinergy, an energy consulting agency in Seattle.)
The California Energy Commission (CEC) is proposing new energy mandates that elevate effectivity requirements for indoor and greenhouse agriculture services by 75% just about in a single day, thus requiring farmers and horticulturists to use solely the costliest horticultural lights at the moment accessible.
While the CEC’s proposals are well-intentioned, they ignore confirmed strategies of incentivizing using environment friendly applied sciences earlier than requiring them.
Instead, I urge California to supply monetary incentives or loans to companies throughout a transition interval that ought to final at the very least 5 years.
Moving ahead with the rules as proposed would place an infinite monetary burden on California’s indoor agriculture business: Based on the affected sq. footage reported within the CEC’s draft proposal, we estimate the required upgrades might cost growers up to $255 million.
All indoor agriculture could be affected, however the lion’s share of burden would fall on California’s vital however already struggling authorized cannabis business, which depends closely on indoor rising.
This has the potential to profit the illicit market by driving up the cost of regulated cannabis additional or, worse, push small growers into promoting illegally or going out of enterprise.
Specifically, the proposed updates to California Title 24 would require indoor horticulture lights to have an effectivity score of two.1 umol/j by January 2023.
This is achievable solely by changing all of a facility’s lights with essentially the most environment friendly LED lights accessible right now. But effectivity is pricey – compliant fixtures cost 5 occasions or extra as a lot as the common fixture in use.
The upfront cost of this transformation might be as a lot as $62,000 for every 1,000 sq. toes of rising cover.
Further, the newest research by the California Department of Energy estimated that solely 4% of indoor services and a couple of% of greenhouse services had been powered by LEDs.
Thus, this mandate would require over 95% of rising area to be outfitted with new, costly tools. It’s considerably akin to requiring everybody in California to purchase an electrical car within the subsequent two years with none monetary help.
Illicit operators would profit
California’s legalized cannabis business already endures a heavy tax burden, inconsistent licensing requirements and a scarcity of enforcement towards illicit operators.
Because of those obstacles, Colorado-based business knowledge service BDS Analytics estimates that just about 75% of California’s cannabis gross sales stay within the illicit market.
Adding one other layer of required prices for regulated firms would solely make illicit actions extra interesting, thus strengthening operators who don’t pay taxes or adjust to environmental pointers on the expense of those that do. The state, customers and companies all lose.
Fortunately, there’s a higher, confirmed answer that the CEC ought to undertake.
For years, electrical utilities have supplied incentives to each companies and customers to undertake energy-efficient applied sciences and tools. These incentives create a win-win-win.
In latest years, utilities nationwide have invested roughly $eight billion yearly in such monetary incentives.
The clients who undertake energy-efficiency initiatives with these incentives save instantly on their utility payments. And there’s a ripple impact for patrons who don’t take part: Reduced funding in giant, dangerous infrastructure applications contributes to regular, predictable energy charges.
Meanwhile, the incentives drive adoption of latest, extra energy-efficient applied sciences, and costs for the merchandise drop as suppliers scale, as newer know-how is launched and as competitors heats up.
That is the time to lock in beneficial properties by establishing new minimal requirements and up to date constructing codes that reduce out much less environment friendly know-how.
In this case, if the two.1 PPE minimal goes into impact, it turns into the brand new “baseline” towards which energy financial savings is calculated.
With essentially the most environment friendly lights working at 2.2 PPE, there may be just about no distinction between the baseline and what will likely be put in, so any rebates at the moment accessible could be eradicated or severely watered down at finest.
Ratepayer-funded incentives actually work.
Industries which have gone by means of incentivized-market transformations embrace photo voltaic photovoltaic, CFLs, shopper and industrial LED, constructing requirements (HVAC, insulation, air tightness, home windows), transportation-fuel requirements, electrical autos and plenty of extra.
Look no additional than PV panels
The strongest instance of market transformation is photo voltaic photovoltaic panels.
From 1975 to 2005, the cost of 1 watt of photo voltaic PV panel has plummeted from greater than $100 to lower than a greenback right now, whereas the charges of set up have skyrocketed.
This market has been fully reworked thanks to heavy incentives from state, native and utility incentives, workforce coaching, new financing and heavy federal tax credit and accelerated depreciation alternatives through the years.
Today, photo voltaic PV is a cost-effective funding with none such upfront stimulus, and as such, the tax advantages and money incentives are diminishing – as deliberate – to give attention to the subsequent know-how.
Instead of forcing an costly new know-how on 95% of California’s farmers and working the chance of increasing the unlawful market, the CEC ought to take this chance to use a confirmed methodology that helps each one of many state’s foundational industries and its clear energy targets: incentivizing markets till there’s a increased saturation of a brand new know-how.
Bob Gunn is founding father of Seinergy, an energy consulting agency offering utility rebate experience, challenge administration and full rebate achievement providers to growers, utilities and tools producers. He may be reached at [email protected].
The earlier installment of this sequence is accessible right here.
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