One of the ways law enforcement catch illegal marijuana grow operations is through energy consumption. An indoor hydroponic grow operation requires a massive amount of energy so the police can simply look for the house that is pulling enough energy to power a city block.
Since Colorado legalized marijuana, growers do not have to live with the fear of police finding their operation. Growers do, however, have to live with the high power bill. And now, for growers living in Boulder, Colorado, that bill stands to get a lot higher.
According to USA Today, Boulder County officials plan on charging an extra 2.16 cents per kWh for marijuana growers. This equals around $100 per kilogram of marijuana produced. To put that in simpler terms, an eighth of an ounce of marijuana will end up costing an additional $9.80 to produce.
While no one likes additional fees and regulations, this additional fee is not without merit. The truth of the matter is that the cannabis industry consumes a lot of energy and because of the profitability of marijuana it is often overlooked. Just how much energy does the cannabis industry consume you ask?
Although there are no accurate numbers for 2014, in 2012 (before any state legalized marijuana) a research group at Lawrence Berkeley National Laboratory published a report that found that the cannabis industry is responsible for one percent of U.S. energy consumption, or about $6 billion.
At the time, the cannabis industry was medicinal only so one can only wonder how much energy the industry consumes now. With that figure in mind, it is no wonder that Boulder County would want to levy an additional fee on cannabis growers. No one likes extra fees, but the amount of energy consumed by the cannabis industry needs to be within reason.
Derek Peterson, CEO of a hydroponic farm company called Terra Tech (OTCQB: TRTC), spoke with NBC 9 in Colorado about how some growers can simply be wasteful. “There are so many people who over blast their grows … and it’s really not the right way to do things,” Peterson said. “The margins here are so great that entrepreneurs aren’t driven by necessity.” It is hard to care about the bills when you are making money.
There are solutions to this rampant energy usage, like swapping out old grow lights for LEDs or using a greenhouse to grow cannabis instead of an industrial warehouse. It is up to the cannabis industry to make these changes, otherwise other states and municipalities will start to implement their own additional tax; and good luck trying to repeal that tax whether or not cannabis goes green.
It is important to recognize the pitfalls and hidden costs of every investment and this new energy tax is one of them. As an investor, you vote with your dollars when determing how you want the industry to look.
If you want an expensive and highly taxed industry, then by all means keep investing in cannabis companies that waste electricity. However, if you want a low cost and high profit industry, then you have to put your money into sustainable operations. The cannabis industry needs to go green, and it is up to you to make it happen.