Power Hungry Cannabis Industry Faces Mix of Energy Related Taxes, Fees, and Regulations

Growing cannabis, especially indoors, is energy-intensive. It can take upwards of 5,000 kWh to grow just one kilogram of cannabis (2,000 kWh to grow one pound) as compared to 10,000 kWh of energy to power a residence in the United States for one year. Recent reports show that the cannabis industry is having a significant impact on the use of electricity in states that have legalized it for medical and/or adult use. In 2015, various reports concluded that cannabis growers accounted for approximately 1.7% of the United States’ total electricity usage, a cost of upwards of $6 billion. The vast majority of states that have legalized cannabis cultivation, for medical and/or adult use, have not addressed the issues surrounding energy consumption prior to enacting legislation. As a result, municipal governments, state agencies and public utilities have had to take a reactive approach to the astronomical utilization of energy.

Currently, states and municipal governments that have legalized medical and/or adult use are implementing various techniques in order to curtail electricity use. The techniques vary, but the most common are taxes and/or fees on energy consumption. For example, Boulder County, Colorado has a requirement that growers either offset energy consumption with the use of renewable energy or pay a $0.02 charge per kWh of energy use. In addition, some state regulations have an adverse effect on energy consumption and compliance results in an increase in energy consumption by growers. For example, when Pennsylvania legalized cannabis in 2016 for medical use, its regulations required growers to contain their entire crop in indoor facilities  without addressing how the State would cope with the corresponding energy use from such requirement.

Although New Jersey has not yet weighed in on the energy use issues associated with the emerging cannabis industry, it is imperative that growers (and those that are contemplating growing operations) consider the impacts of their operations regarding electricity use in order to be prepared for any future regulations and/or taxes that might negatively affect their operations and profitability.