How Cannabis Cultivators Are Dealing With Rising Energy Costs

Key points:

• U.S. electricity costs rose 5.9% over the 12 months that ended May 31, creating another pain point for cannabis cultivators running energy-intensive operations.
• Increased usage thanks to artificial intelligence data centers and increased fuel costs attributed to the Iran war are contributing to the surge in power costs.
• Indoor cannabis grows use about 50 times more power per square foot than an office building.
• This is increasing producers’ overall costs and tightening margins as pressures from the illicit market mean operators can’t pass costs onto consumers.

Tiana Arriaga has watched helplessly as her electricity bills climbed by tens of thousands of dollars a month.

As the vice president of product and marketing at vertically integrated marijuana multistate operator Standard Wellness, which has cultivation facilities in Missouri, Ohio and Utah, she runs indoor rooms with full environmental automation: air conditioning, humidity controls and lighting – all of it running nonstop, and all of it creating another headache for a company struggling with slim margins.

Arriaga said she’s seen electricity costs for Standard Wellness increase between 8% and 12% over the past 16 months as massive data centers and the war in Iran drive up U.S. energy costs.

“This may seem like a small number, but it is quite a step when you are operating vertical operations such as ours,” she said. “Natural gas has also gone up dramatically, and we are seeing a 46% increase from the last two years.

“When you have incremental costs on a residential bill, it’s expensive. On a cultivation facility, it’s astronomical.”

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