• Energy Storage Systems
  • Thermal Energy Storage
  • California
  • Incentive Programs

Managing Marijuana's Appetite for Energy: The Benefits of Dynamic Pricing and Thermal Energy Storage

Ricardo Rodriguez
Sep 25, 2018

Electrical Substation

In September, Governor Jerry Brown solidified California’s leadership role in building the future standard for clean energy by signing legislation that requires all retail electricity be generated from carbon free resources by 2045. To accomplish this, finding alternatives to natural gas for flexible capacity is essential. Fortunately, energy storage systems (ESSs) that provide flexible grid-balancing services are increasingly being deployed. As California’s marijuana industry takes shape—with regulations and licensing currently favoring commercial indoor operations—managing the industry’s energy consumption must become a priority.

According to a 2017 study in California, “cannabis production requires 8 times as much energy per square foot as a typical US commercial building, 4 times that of a hospital, and 18 times that of an average US home,” accounting for 3% of the state’s electricity consumption. As California’s generation mix and grid becomes cleaner, utilities and state regulators must consider rate reforms that encourage sustainable consumption patterns and promote the deployment of energy efficient technologies.

Time-of-Use Pricing

Most utilities apply demand charges based on the non-coincident peak demand for each commercial customer. While this incentivizes customers to improve their individual load factors, it does not necessarily incentivize customers to do so during the grids peak periods or ramping hours. For example, in Colorado, large demand charges have led marijuana growers to even out their energy consumption throughout the day. While this approach has been valued by grid operators in the past, the need to integrate variable renewable energy has lessened the usefulness of this approach.

As such, utilities should modify time-of-use rates by implementing peak-concentrated demand charges that have the potential to send a price signal that better reflects when the grid is expected to be under stress and can incentivize commercial customers to shift consumption to low cost, off-peak periods permanently. In California, this means consuming more energy in the middle of the day, when solar generation is high, and avoiding early evening peaks. In Colorado, this means consuming more energy at night, when wind generation is high and demand is low.

Thermal Energy Storage

As California utilities consider implementing peak-concentrated demand charges, the value proposition of an ESS for indoor commercial cannabis production is greatly improved. While most discussions will invariably center around battery storage, thermal ESSs (TESSs) can offer cost-effective and tailored solutions for indoor cannabis facility owners. In 2016, a study prepared for San Diego Gas & Electric found that air conditioning (AC) accounts for 21% of the energy consumed by indoor cannabis operations. Consequently, technologies are needed that can shift the electricity required for AC to low cost, off-peak periods and support the integration of renewable resources. 

Fortunately, behind-the-meter TESSs can do just that. For example, Ice Energy’s the Ice Bear stores energy by making ice when desired, typically during cooler off-peak hours. During peak hours, it turns off energy-intensive AC compressors and uses the stored ice to provide cooling for up to 6 hours. Each Ice Bear TESS comes with a smart-grid controller and bidirectional communications that give utilities real-time visibility and control. The company claims this can reduce system owners’ utility bills by up to 40% and offers utilities a way to eliminate a significant portion of peak cooling load.

As the marijuana industry evolves against the backdrop of energy reform in California, ESSs—including TESSs—will play an increasingly important role in managing electricity consumption. Fortunately, the California Self-Generation Incentive Program will cover up to 60% of project costs for eligible ice TESSs. Businesses can also use property assessed clean energy financing or other green lending options to further reduce upfront costs—making California’s renewable energy goals ever more attainable.