Harnessing Combined Heat and Power (CHP) for Indoor Food and Cannabis Cultivation

While the cannabis industry enjoyed robust wholesale prices and strong local markets in the early stages of cannabis legalization efforts, state by state legalization efforts are starting to expose local markets as being smaller than once believed, although large scale demand for cannabis remains strong and the industry continues to grow. Despite the growth in the industry as a whole, early adopting states are starting to look overbuilt, with oversupply driving down prices, and investors in cultivation facilities in new markets are taking a harder look at market size and how to ensure long term profitability by building appropriately sized facilities and prioritizing operating costs during the planning, design and construction phases of cultivation projects. We’ve seen similar impacts in the indoor cultivation of food crops and leafy greens, where many cultivators are learning that the energy intensive nature of indoor cultivation and associated cost of operation drives a price point for their product that may be untenable for the average consumer.

At Surna, we’ve often spoken about the importance of reduced operating costs to the long-term viability of cultivation businesses, and the indoor agriculture industry is feeling the effects of its failure to consider energy costs in facility design for too long. The writing is now on the wall in mature markets, and as a result we are beginning to see the industry shift toward facilities designed with priority given to energy savings and the longevity of the business top of mind.

One of the ways cultivators can do this is by focusing on energy efficiency in the design of their grow facility. Utility costs for growers are usually in the top three recurring costs for their business, and in some markets is the highest recurring cost. Making wise decisions in the design process and incorporating energy efficient lighting and HVAC/D systems is one of the ways cultivators can reduce energy costs. Another way is by incorporating Combined Heat and Power (CHP), also known as cogeneration systems, into the facility design. While there are clear benefits to utilizing CHP, there are also challenges and complexities, so how can a cultivation company decide if CHP is the right choice?

What is CHP?

CHP stands for Combined Heat and Power (also referred to as Cogeneration or CoGen) and is a term used to describe the onsite production of electricity, usually by using clean burning Natural Gas, with captured heat as a byproduct. That heat can then be used in several different ways to ensure that efficiency is maximized. It is essentially an onsite power plant whose waste heat is recaptured and can be reused for functions including heating, cooling and dehumidification.

How Can Cultivators Benefit?

The overall financial benefit can come from reduced energy costs, reduced energy requirements (further reducing operational costs), reduced recurring costs associated with supplementing carbon dioxide, reduced downtime, and the potential for higher revenues associated with environmentally conscious brand identity.

There are a number of ways CHP can benefit cultivators. In some areas a power upgrade may be overly costly or the wait to get power to the site may be untenable, so utilizing CHP may be an option for getting them to market faster. The cost of producing power using CHP is lower than the cost of grid power in most areas, resulting in substantially lower recurring energy costs.

The waste heat produced by the power plant can be utilized in various ways in cultivation facilities, usually by incorporating it into the mechanical system for climate control. Thermal energy is captured in a hydronic loop, where the hot water is used as reheat for dehumidification functions, for ambient heating in comfort spaces, or to power absorption chillers to produce chilled water, all of which reduce the energy need, reducing the cost of energy and the amount of energy consumed.

CHP produces carbon dioxide as a byproduct, which can be captured, cleaned and distributed to cultivation spaces, eliminating recurring costs associated with purchasing compressed carbon dioxide and reducing or eliminating carbon emissions associated with burning natural gas, while reducing costs associated with purchasing compressed carbon dioxide.

When considered in the design, implementing CHP can also provide some power supply redundancy for commercial growers, creating energy security, mitigating the risk of power outages and unexpected downtime, and allowing for grid independence.

For cultivators whose brand identity revolves around sustainability and mitigating the climate impact associated with energy use and reducing their carbon footprint, incorporating CHP and taking advantage of every benefit they offer is a great way to reduce greenhouse gas emissions and operating costs at the same time.

What Does CHP Cost?

The initial capital investment for CHP is usually higher than that of grid power. However, in many cases the difference can be paid back in as little as 3 years, setting cultivators up for meaningful operating cost reductions for decades to follow. There are also significant tax benefits associated with incorporating CHP into cultivation facilities, including large tax credits and accelerated asset depreciation. Cultivators may also qualify for certain local and state programs that assist with financing and cost mitigation in addition to the federal tax benefits.

What Are the Other Considerations?

Utilizing CHP in your facility will require well organized coordination during the design and construction phase of your facility, and ongoing maintenance by qualified professionals. The CHP provider will have to coordinate very closely with the mechanical and electrical engineers in particular (although architects and structural, civil and plumbing engineering designers will likely be involved as well), and cultivators are well served by selecting design professionals like Surna with direct experience in implementing these types of systems in cultivation facilities. Utilization of CHP will also require a sophisticated BMS system such as Sentry IQ (or products with similar capabilities).

Ongoing maintenance and plant operation is a specialized expertise. Often cultivators will have a maintenance contract with the provider of the plant for ongoing scheduled maintenance. However, they should still have facilities staff who understand the basic functions of the CHP plant, electrical and mechanical systems in the facility, controls systems, and how they all interact with one another. When unscheduled maintenance issues arise, the facilities staff should be competent to narrow down the issue and likely cause to ensure that the right resources are deployed to resolve it.

In Summary

Utilizing CHP can afford cultivation companies substantial benefits associated with reducing ongoing electrical costs and ensuring the long-term viability of their business. However, there are cost, complexity and maintenance considerations that should be fully understood before making the decision to implement. For a deeper understanding of the benefits and complexities of CHP in cultivation facilities, and the resources needed to bring a CHP project to life, download our free CHP whitepaper.