One of the first steps for a cultivation start-up is to find a suitable location to grow. Vacant warehouses usually top the list.
Lease agreements are sometimes required to complete a license application, but groups may be hesitant to engage experts before they’re awarded a license and start raising funds.
If a warehouse looks big enough, and the previous tenant was a manufacturing business, it’s usually assumed there will be sufficient power.
Faced with impending application deadlines, sometimes property agreements are signed without engaging any experts at all, and the group collectively pats themselves on the back.
“Yay, we saved money!”
Spoiler alert: No, you didn’t.
Signing a lease on a building and then realizing you don’t have enough power is never money-saving news.
This scenario is all too familiar to Anthony Winston III, P.E., founder of Winston Engineering Inc., a full-service engineering firm that works in the cannabis industry.
I spoke with him recently about what cannabis start-ups should keep in mind as they estimate electrical needs for their facilities. Here are five quick takeaways from our conversation:
1. There is no “rule of thumb” calculation.
Groups scouting potential facilities want a basic equation to help them determine power requirements—for example, x number of amps for every x number of square feet.
Relying on rule of thumb estimates is risky business.
Winston’s firm has experience helping cannabis companies build their pro formas, and he says there’s no magic formula for determining power requirements that would apply to every situation.
“It gets really complicated because there are so many variables,” he said. “It’s really good to bring in engineers ahead of time, and if you can, a designer.”
Designers typically aren’t incorporated until later in the process, but their involvement should be prioritized, according to Winston.
“You should bring in an architect or designer to give you rough sketches early on. Yes, there is an upfront cost early on, but it can save you potentially six figures down the line once you actually secure the building,” he said.
2. Look at a building in its totality.
It’s critical to look at the big picture when running general load calculations for a facility, not just grow lights and HVAC. “Understanding building consumption from a cultivation standpoint is important, but you need to know non-cultivation space as well,” Winston said.
The cultivation area of most indoor grow sites accounts for only half of the building’s footprint. Throw in extraction and processing equipment, and cultivation space accounts for even less.
Everything from irrigation systems to office appliances runs on electricity, and many of them generate heat. Industrial dehumidification equipment will dramatically influence your power requirements as well.
Determining the equipment and activities that occur throughout the rest of the building will directly influence the accuracy of the electrical load calculations.
3. Three-phase power is essential.
When asked whether single-phase or three-phase power is preferable for cannabis production facilities, Winston didn’t hesitate to answer: “Three-phase, every time.”
The difference can mean dramatic reductions in capital and operational expenses for a business.
With three-phase power, installation costs are less because you need less current to run your equipment. “You’re saving on copper, which is very expensive, and HVAC units run much more efficiently on three-phase systems than they do on a single-phase system, so now you’re saving energy as well,” said Winston.
What’s the gold standard for commercial production facilities? Winston highly recommends a 480-volt, three-phase system. “Copper is less, home runs for the electricians are less, and installation costs are less. It adds up to really big savings,” he said.
4. Getting more power can be complex.
If your building needs an electrical upgrade, the road to full power can be an arduous journey. It takes more than just a phone call, and in most cases, a lot more.
According to Winston, the first step is to have an engineering team do general load calculations based on the equipment you’ll be using. Put this in a letter with the company’s engineering stamp and bring it to the utility to start the process.
Alternatively, firms like Winston’s can do a complete electrical plan. “Either one you take to the utility, and say ‘Hey, this is what I need,’ and the client works directly with the utility to go through that whole process,” he said.
Increasing power can be complex and pricey, and there are contracts to specify who will be responsible for what part of the process.
“The utility may set a new transformer on your property, and then you will be responsible for running power to your building. Or the utility may do this at your cost, but once power reaches the main meter at the building, you are responsible for everything else,” Winston told me.
The timeline for this kind of work? Prepare to be patient.
“It’s different with every municipality,” Winston said. “I can speak to Southern California; I’ve heard of estimates of 18 months. It all depends on what their scheduling is and what they have on the backlog.”
To further complicate matters, this work can affect more than just your property. “Sometimes you need to dig up roads, so you have to coordinate road closures,” Winston explained, “It can be a big deal.”
5. Have a backup plan.
If you run a large indoor cultivation facility, it would be negligent not to plan for power outages.
Onsite generators can help maintain emergency and security functions in the event of a service disruption. Or, if the budget allows, generators can be sized to supply 100% of a building’s electrical needs.
This can substantially increase a start-up’s capital requirements, but according to Winston, growers have options.
One is to rent generators instead of buying them. For example, if you’re growing in Oklahoma during tornado season, “You can rent a generator, plug it in, and now you don’t have the heavy cost of owning your own generator,” Winston said.
Another option is to use a generator bank that produces electricity onsite and stores it in batteries.
Winston said this backup system could also benefit the operator during peak demand hours.
“During high demand, utilities charge you more per kilowatt-hour. If you’re able to temporarily disconnect from the utility and get your power from your batteries, now you’re saving money, and that delta can be pretty significant depending on the size of your operation,” Winston explained.
Conclusion
If you don’t see the value in hiring electrical engineers before leasing a building for cannabis production, you should think twice about getting into this industry.
This kind of shortsightedness is indicative of a company’s values, and it won’t be the last time that impractical decisions are made because something isn’t deemed to be “worth the money.”
If your pro forma anticipates tens of millions of dollars in annual revenue, but you can’t justify spending smart money upfront for engineering expertise, this business isn’t for you.
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