Market Characterization of Indoor Cannabis Cultivation

Market Characterization of the indoor agriculture market, future outlook, and savings potential. To address challenges of climate variability, population growth, and land use, there have been efforts to grow more products in urban areas. Indoor farming is becoming more common but come with various challenges, most of which relate directly to electricity consumption.

This report outlines the findings of a market study and technology assessment on Indoor Cannabis Agriculture (ICA) in Southern California. The report findings are based on a combination of literature review and stakeholder interviews. This study was commissioned by Southern California Edison (SCE) to examine impacts of increased demand and investigate a potential offering within its energy efficiency (EE) incentive programs. Interviews were conducted with various stakeholders including Investor Own Utilities (IOU), growers, associations, and vendors to document the current industry practices and existing market barriers in adopting EE techniques in Southern California. By understanding how and why industry stakeholders make decisions, the existing barriers are more distinctly defined, and solutions developed. The intent of this report is to assess the market to determine savings potential, how utility intervention strategies can help achieve that potential, and recommend a course of action. The scope of this study involved the following components: Literature review to research market forces, economic drivers, and regulatory factors  Interviews with industry stakeholders: cultivators, growers, IOUs, vendors, and associations  Analyses of industry norms, energy savings potentials, greenhouse gas reduction (GHG), and energy reduction potentials Recommendations of proposed incentive design Proposed next steps for increasing ICA participation in IOU Incentive Programs   Based on the findings from the literature review and interviews, it was found that the cannabis market in California will continue to expand and experience changes in industry transparency, facility types, equipment used, and operations. Being several years into legalization, a shift to more mainstream and corporate proliferation has initiated, and the trend is expected to continue. This has resulted in a change in the types of stakeholders involved, the investment capital available, and the facility types that are being constructed. Future years will see a continual transition from “underground” and/or illicit operations to more mainstream and amalgamated businesses. There will be a combination of existing facility renovations and new construction to establish indoor cannabis grow facilities. Both scenarios will present challenges related to grid impacts, infrastructure updates, and significant opportunity for demand side management. Interviews with key stakeholders uncovered various market barriers for ICA facilities participating and receiving utility incentives. Some of the key barriers identified include lack of capital available for EE technologies, lack of trust to share data with utilities, and frustrations with the custom incentive process due to timelines and data required. Stakeholders also shared their perspective on potential solutions such as streamlining the incentive process, providing education and training to growers, and tailoring incentives for the ICA market. This report summarizes the state of the industry, interview results, future outlook, and recommended next steps.