In Desert Hot Springs, California, the luxury cannabis company Canndescent recently installed a 282.6 kilowatt solar system that can generate enough energy to power around half of its growing operation. According to the company, it’s the first on-site solar system to power a large-scale cannabis growing operation in the U.S.
The cannabis industry faces a particular challenge when it comes to green energy. There’s no question that it needs to clean up its operations, and quickly: The legal indoor marijuana growing industry eats through over 1% of the U.S.’s energy supply annually, and emits over 15 million tons of greenhouse gas emissions (equivalent to 3 million cars). But the cannabis industry is still mired in a tricky legal situation: Even though recreational weed is legal in 10 states and medical marijuana in 33, it’s still considered an illegal substance at the federal level, which overrides its status in the states. This, says Canndescent chief financial officer Tom DiGiovanni, makes it tough for cannabis operations to avail of low-interest loans or the 30% federal solar investment tax credit that make renewable energy affordable for other industries.
Canndescent opened its 11,000-square-foot growing facility in 2016, and “from the start, we wanted to reduce our carbon footprint,” say DiGiovanni. Given Canndescent’s location in sun-rich southern California, and the expansive layout of the property, solar energy made the most sense for lowering their emissions.
Even though DiGiovanni previously worked in California’s solar industry, he “didn’t realize it would be impossible to find financing for a cannabis project,” he says. If you’re a cannabis company, “the banks will basically just look the other way,” and it’s next to impossible to avail of the federal investment tax credit. Some smaller growing operations have managed to convert their operations to renewable energy: Sense, a small grower in San Francisco, runs on 100% renewable energy through a local utility program that purchases wind and solar to add them to the mix in the grid. But it’s a different thing for a small business to source from existing renewable resources than it is for a massive growing operation to try to set up its own energy supply–which is what Canndescent aimed to do.
So to get its solar project up and running, Canndescent had to get creative. They secured a loan that considered them property owners, not a cannabis company, to fund the solar project development. “To the lender, it doesn’t look like a loan to a cannabis company,” DiGiovanni says. “They lent their money against the dirt, not against the company,” he adds.
Once the loan was in place, Canndescent worked with the installation company Palomar Solar to design its system. Because fire codes wouldn’t allow for solar panels on the roof of Canndescent’s growing facility, they built parking shelters that amount to 1,360 square feet, and hold 734 panels. In addition to providing over 500,000 kilowatt-hours of energy per year, the elevated solar panel structures keep employees’ cars cool in the hot desert sun, and also shade the sides of Canndescent’s growing facility, which DiGiovanni says has lowered HVAC costs.
Arriving at a financing solution to get this project off the ground, DiGiovanni says, was admittedly a headache. But it was one that he thinks will be alleviated for other growers if cannabis is legalized at the federal level. Then, companies will be able to access tax credits and low-interest loans for renewables. “I think it will be somewhere between 18 and 36 months before we see legalization at the federal level,” DiGiovanni says, “but the biggest thing that will happen once this gets resolved is that institutional lending and bank financing will open up to the industry, and we’ll see more companies get access to financing for solar.” Canndescent, he adds, is far from the only company in the cannabis industry talking about ways to lighten their environmental footprints, but without full legal status, it remains incredibly difficult.