As the Hawaii Department of Health finalizes interim rules for the state’s new medical marijuana dispensary program, one definition could mean the difference of millions of dollars for entrepreneurs hoping to get into the business.
The law creating the dispensary program says that medical cannabis must be grown in “enclosed indoor facilities,” a requirement Sen. Will Espero explained was added in order to appease security concerns.
The department is scheduled to publish draft rules Jan. 4 that prospective dispensary owners hope will clarify what the state is looking for when it awards eight licenses to grow and sell medical cannabis statewide.
But if the department defines “enclosed indoor facilities” in a way that forces business owners to grow marijuana in warehouses rather than greenhouses, electric bills could run as high as $140,000 per month per site, according to one businessman’s estimate.
That would be up to $3.36 million over the course of one year to power two indoor grow facilities.
Nationally, marijuana plantations use $6 billion of electricity per year, or about 1 percent of the nation’s electricity, Quartz reported.
In California, legal marijuana cultivation accounts for 3 percent of the state’s energy usage. And in Denver, marijuana-growing facilities were responsible for 45 percent of the city’s increase in electricity use last year after recreational pot use was legalized.
The electricity demands even spurred Boulder County in Colorado to add an extra tax on marijuana cultivators.
“They’re using more energy than almost anybody else,” the county’s sustainability coordinator told USA Today last year. “There’s nothing else that comes close.”
But while high energy usage by marijuana farmers is a nationwide issue, the problem is exacerbated in Hawaii because the islands have the highest electricity costs in the nation.
On the neighbor islands, utility rates are even higher than on Oahu. The average rate for large power-use businesses on Maui was nearly 44 cents per kilowatt hour last year.
Brian Goldstein, a technology consultant who is applying for a dispensary license on Oahu with a team called Manoa Botanicals, said he’s hoping the state Department of Health allows greenhouses.
He noted that, ultimately, the costs of production will be passed on to patients.
“If one of the goals is patient access … then allowing indoor greenhouse facilities that are highly secure but use natural sunlight is going to be helpful in achieving that policy goal,” he said.
On Wednesday evening, dozens of people attended the National Cannabis Industry Association’s workshop at the Plaza Club in downtown Honolulu.
Stephen Keen, CEO of Surna Inc, a Colorado company that manufactures water-chilled climate control systems, gave a presentation in which he described a marijuana grow facility as a “swimming pool inside a data center.”
He estimated that the monthly utility bill for a medical marijuana production center in Hawaii would be nearly $60,000, at a rate of nearly 26 cents per kilowatt hour.
“How can we make this to be the most sustainable industry that we can, given that it’s starting from the ground up?” — Steve Sakala, Hawaii Farmers Union United
That’s based on using 130,500 kilowatts per hour for lighting and 101,798 kilowatts per hour for cooling each month.
Bill Jarvis, who runs the Mobi PCS telecom company and is applying for an Oahu license with the organization Pono Wellness, thinks the cost would be higher.
He estimates that if medical marijuana must be grown in a warehouse, the monthly electric bill for one 15,000-square-foot facility could range from $65,000 to $85,000.
“The utility cost will exceed the rent cost and that doesn’t happen very often,” he said.
Goldstein’s estimate is even higher. If the cost of energy is 26 cents per kilowatt hour, powering a facility that’s up to 20,000 square feet would cost from $80,000 to $140,000, he said.
Both Jarvis and Goldstein believe that allowing greenhouses would cut the utility bill for a medical cannabis grow facility by at least half.
And while renewable energy might help bring down costs, many say it’s unrealistic to expect it to power an entire marijuana production facility.
Keen said that relying on solar panels to power a medical cannabis production center would be expensive and could require up to four acres of land.
“Frankly, I’ve never seen a grow using solar power,” Keen said. “I’ve never seen one using wind energy. It’s sad but it’s true because of the cost of it and the extensive space that it takes to set up something like that.”
Jarvis also says installing solar panels “might reduce the overall bill but it wouldn’t eliminate it.”
Darren Pai, a spokesman for Hawaiian Electric Co., said the company expects to have sufficient generation to meet the demand from production facilities and dispensaries that will be able to open next summer.
But even if that’s the case, some say it doesn’t make sense to burn fossil fuels to grow medicinal marijuana in sunny Hawaii.
Steve Sakala is president of Hawaii Farmers Union United in Kona on the Big Island and has been consulting with dispensary license applicants.
“If one of the goals is patient access … then allowing indoor greenhouse facilities that are highly secure but use natural sunlight is going to be helpful in achieving that policy goal.” —Brian Goldstein
He thinks the question that policymakers should be asking is, “How can we make this to be the most sustainable industry that we can, given that it’s starting from the ground up?”
He noted that Hawaii has some of the best weather and a year-long growing season, which has attracted agribusiness giants like Monsanto and Syngenta.
He pointed to Arizona, where the state requires that medical cannabis be grown in enclosed facilities but allows greenhouses and enclosed outdoor grow facilities. Greenhouses are also allowed in Illinois and Maine.
Sakala lobbied unsuccessfully at the Legislature earlier this year to allow outdoor marijuana farms.
He said that if the Department of Health’s interim rules are too restrictive, he’ll be back at the Legislature advocating to change the requirements.
“We have great growing conditions and there’s no reason why we shouldn’t be taking advantage of it,” he said.