It’s a growing industry, and in our home state of Michigan, it’s been an exciting time in cannabis sales. Continue reading “Michigan Marijuana: An Update”
The number of states with new cannabis regulations on the books is nearing twenty. States like Colorado, Illinois, and Michigan have seen tens of millions of dollars worth of sales in a single week. But the financial institutions are still wary. That hesitation doesn’t just hurt this growing industry; it also hurts the environment.
Last month, Michigan began selling legal cannabis products for the very first time. In just six weeks, retail sales surpassed $10 million and generated $1.7 million in new tax revenue. All of that success came from businesses that relied on personal or small-scale venture rounds to handle the substantial investments that go into a successful grow facility. From the ground up, many of these firms have had no access to the financial support that nearly any other business would rely on to get started.
Marijuana remains illegal at the federal level, and banks rely on federal rules, licensing, and regulations to operate. At the end of the day, most banks won’t touch cannabis companies for fear of breaking federal law. In some cities and states, smaller credit unions and banks have very quietly financed cannabis operations. However, that liquid capital stream has been almost entirely out of reach for marijuana firms. That’s put a massive brake on growth, but it has bigger consequences, too. It’s also hurting the environment.
As we’ve discussed many times, marijuana growers face immense energy demands. Its lighting and HVAC demands are a massive strain on the grid, and that electrical need is expected to nearly triple by 2023. When companies cut corners and rely on outdated technology or press lamps designed for recreational use into industrial-scale applications, they don’t just waste their own money. They’re also wasting staggering amounts of electricity, and that added strain hurts both the grid and the planet.
Looking ahead, we see banking protections as one of the most important pieces of legislation in Michigan and in any of the twenty states with legal marijuana laws. There is traction on that front. The SAFE Banking Act passed the US House of Representatives way back in September of 2019, though with some reservations. Critics of the bill maintain often confuse the banking regulation with marijuana regulation more broadly, a misinterpretation that has slowed acceptance of the Act in the Senate which, as you may have noticed, has had other pressing issues pushed to the center of its attention.
We’ve seen first hand just how important cannabis’ reliance on energy is now, and with growth in the industry projected to skyrocket, what businesses have in place right now will dictate not just which companies will survive, but if our aging grid system will continue to be able to handle the load of growers and the general public successfully. By allowing banks to safely loan necessary funds to these firms, state and federal governments will benefit even more from tax revenue and let market forces work, without putting the environment at risk.
What’s the most expensive and wasteful investment to make? One you have to make twice. For marijuana growers, starting their sustainability and energy efficiency efforts the right way from the start is a key component to being competitive in an ever-tightening industry.
The basic laws of supply and demand have played out in textbook fashion in the still young legal marijuana business. As more states enact legislation to legalize cannabis, supply us skyrocketed, causing prices to drop. And drop. And drop. The well-cushioned margins of Day One were nice, but enjoyed only by those firms already up and running. Today, many of those companies are feeling the pinch, and it’s not just from outside competition. These companies’ biggest battle comes from inside their facilities, where inefficient lighting and HVAC systems have kept production costs high and prices have slipped.
Those firms are quickly implementing new, more efficient systems to battle the problems arising from lower prices. In an industry that sees so many factors and influences outside of their control, like legislation, banking restrictions, and limited licensing opportunities, production costs are often the one area firms can address head-on.
As the old guard upgrade, newer producers have learned those same lessons and taken them to heart. Growers in the past 12-18 months quickly realized that the only smart way to address margin concerns over the long run is by making smart investments in fixtures and equipment right now. There are many lessons to learn for utilities, too. For instance, 4% of Denver’s energy demand comes from marijuana growers. With demand expected to more than double by 2023, both consumers and producers need to implement new ideas, new sources, and new standards to handle the load.
We’re working with growers to make their facilities as energy efficient as possible, plugging in innovative techniques to make the most out of heat byproducts, recycle humidity, and make each light fixture do more with less. Technology learns and adapts, empowering business owners to take data in real-time and make better decisions in their energy usage and get the most out of each crop.
Ready to grow? Let’s get after it!
As the national rolls into a new year, recreational marijuana legislation across the country has gone into effect. Thousands of people lined up for hours, even days, to be the first to purchase legal marijuana in Illinois. It was a similar story in Michigan, who saw legal weed sales take off in late 2019. Demand for safe, regulated, and legal pot is reflected in the prevalence of new laws legalizing the drug and the tens of thousands of people eager to buy.
But there’s more to that demand than just sales. Marijuana is an extremely energy-intensive crop, and as growers have multiplied and stepped up production, their energy footprint has grown, too. In 2018 alone, a recent study found that legal growers used up 1.1 million megawatt hours, the same amount of energy used by over 92,000 homes.
That’s just the start. With another half dozen states legalizing marijuana in 2020 and more states expecting to follow suit after elections this November, more and more growers will pop up across the country. With demand high and revenue flowing, current producers will increase their output as well. From 2017 to 2022, the electrical demand of legal marijuana growers is forecasted to increase by 162%.
Going forward, outdoor growers may have some advantages, provided they have a cooperative climate. Indoor growers use up nearly 18 times more electricity than outdoor per gram of weed grown. They also emit over 25 times the amount of carbon emissions. That’s because indoor growers rely heavily on artificial light, heaters, fans, and climate control systems to control humidity.
In Michigan, there’s already an interest in regulating just how much energy a grower can use. For now, the state doesn’t even mandate reporting of energy consumption by growers. There are no Michigan laws to monitor or track energy use, a measure that Illinois did include when it legalized marijuana.
There’s a drawback to that lack of oversight, too. It’s the perfect opportunity to offer incentives and tax breaks to growers who do invest in efficient and responsible practices. By encouraging metered energy use, both private and public entities have the opportunity to invest in the most efficient firms who, as a result, will be the most competitive and successful in the long-term.
And that might be incentive enough. As more growers enter the market, the industry is going to get more and more competitive, and energy efficiency is going to offer the best way to reduce costs and maintain the current retail margin. We’re already working on reducing energy use, carbon emissions, and improving crop yields for both indoor and outdoor growing facilities in the Midwest. Tomorrow’s winners will be firms that invested in efficiency early; be one of the smart ones.
Congress just opened the started gates for the cannabis industry. For years, cannabis businesses have largely relied on private funding and investing to grow their business. The lack of protection for banks severely stymied growth; those days are over. Continue reading “SAFE Banking Bill Moves Through House”