How Growers are Reducing Costs and Increasing Efficiency with Combined Heat & Power
Combined heat and power (CHP) systems are growing in popularity within the agribusiness community. By producing electricity and thermal energy on site—replacing electricity provided by local utilities—CHP systems increase energy security and improve energy savings.
For medically-licensed cannabis growers, the financial benefits that come from generating power and capturing heat that’s produced on site can be significant. CHP, also known as cogeneration, is allowing businesses in the controlled environmental agriculture industry to gain a competitive advantage and lower their operational costs.
While heat and power have traditionally been generated at distant power plants, and delivered through separate processes, CHP combines those processes to maximize efficiency. Much more than just an engine and a generator, CHP is a comprehensive, integrated system. With combined heat and power, natural gas can be used to generate power, heat, and carbon dioxide on site. This allows licensed growers to meet standard electrical demands, such as lighting and ventilation, with minimal energy waste. Heat that’s produced on site is captured and delivered as a hot water loop that can be used to produce chilled water for air conditioning and humidity control, or to reheat indoor air for proper ventilation. As much as 85% of every Btu of natural gas is converted into useful energy with CHP, making this the single most economical way to convert natural gas into energy.
Combined heat and power systems are generally categorized based on the type of “prime mover” that drives the system. The five predominant prime mover technologies used today are:
- Reciprocating engines
- Gas turbines
- Fuel cells
- Boiler/steam turbines
Far from being the new kid on the block, combined heat and power has actually been used for many years to provide highly-efficient electricity and process heat in industrial, large commercial, and institutional applications. Cogeneration technology can be deployed quickly and cost-effectively, and there are few geographic limitations. Combined heat and power systems are now being developed to use either fossil or renewable-based fuels, or some combination of both.
Current demand for CHP is being driven by the need for more flexible power solutions amidst current electricity shortages in the United States and Canada. Cannabis growers in certain regions are finding that they cannot get the electricity that they need to light crops and maintain appropriate levels of indoor ventilation through traditional electricity grids. In highly-regulated industries, such as controlled environmental agriculture, where maintaining high quality is critical for continued success, this level of unpredictability is not acceptable. In order to maintain a high yield and continue to meet state requirements, more businesses are turning to CHP.
In the legal cannabis space, where 50% of the cost of goods sold goes to electricity, the energy savings that growers realize after switching to cogeneration power are substantial. With the low cost of natural gas, CHP systems are now the most economical way to produce energy.
Combined heat and power solutions have been shown to reduce the average indoor agriculture business’ operating cost by 30% to 40%. These financial savings are multiplied when businesses adopt the modular grow approach, in which businesses rent modular, fully-functional cannabis grow facilities that are married to the latest energy solutions. KMB Design Group has become a pioneer in modular growth technology, advancing this capability with a combination of technology partners and financial partners.
To further put into context the value that CHP can provide, we’ve rounded up the top five biggest benefits to combined heat and power for businesses in the licensed cannabis space.
Top 5 Advantages of CHP
1. Lowering the Cost of Goods
Using CHP allows businesses to increase overall process efficiency. This reduces the amount of power consumed in an average growing operation by 30% to 40%. With electricity often accounting for more than half of the cost of goods sold in cannabis and other indoor agriculture operations, lowering this expense reduces the cost of operations by default. Growers with CHP systems are no longer purchasing electrical power from the grid. In fact, they’re sometimes able to sell electricity to the grid, creating an additional income stream and source of revenue.
The economics at play are simple. When heat recovery is utilized for dehumidification on a CHP system, it’s around 50% cheaper. The specific amount of money that a business can expect to save with CHP varies depending on the current price of natural gas and electricity. A kilowatt of electricity can usually be produced for a lower price with natural gas than through buying it from the grid. Firms like KMB offer guidance and conduct feasibility studies to determine the value and anticipated cost savings from installing cogeneration systems.
Although startup costs with CHP can sometimes be substantial, medically-licensed cannabis growers should explore commercial financing and funding for commercial projects. Federal tax incentives may also be available for new “Financed” grow facilities that are capital constrained. The U.S. Department of Energy and the Environmental Protection Agency (EPA) offer incentive programs related to CHP. Individual states may also have rebate programs for businesses that invest in cogeneration solutions. To apply for these programs, a feasibility study must be conducted by a licensed engineering firm, like KMB.
2. Increasing Yield
Combined heat and power systems have a broad range of operations for cooling and dehumidification. With a process that can be more tightly controlled, growers are able to increase quality and yield, while at the same time decreasing unnecessary waste. Tighter controls lead to optimized growing operations, since unexpected power outages can damage crop quality and lead to lower rates of production.
According to the federal government, CHP applications can reasonably be expected to operate at 65% to 75% efficiency. That is a large improvement over the national average, which sits at roughly 50% when these energy services are provided separately.
3. Easy Setup
For remote applications, modular Combined heat and power solutions require minimal time to set up, usually with no grid availability limitations or electric service upgrades necessary. CHP systems do not need to be connected to the grid, so, for the modular approach, interconnection studies are not required to get started.
KMB can design custom CHP systems to meet the power needs of individual growing facilities, which is especially important for medically-licensed cannabis growers. In these types of specialized facilities, power must be constant and growers cannot afford to have any unexpected downtime. That leads into the next advantage of using combined heat and power, which is greater resiliency.
4. Greater Resiliency
Generating power on site reduces the risk of power outages and decreases the reliance on external power grids for providing electricity or back-ups. This amounts to a higher level of redundancy and greater resilience for growers in the indoor agriculture industry. With reduced risk from fluctuating energy prices, growers can better align their budgets and shift their focus to other areas of the business.
Within the medically-licensed cannabis industry, it’s not uncommon for growers to struggle with electric capacity constraints. Growers that use electric HVAC equipment may run out of capacity, and upgrading service is often a time consuming and expensive process. Those delays lead to lost revenue. CHP significantly reduces these challenges, while also making growers less reliant on electrical grids or backup generators for critical processes like cooling and ventilation.
KMB’s use of the Capstone Microturbine provides an additional level of inherent redundancy. Capstone Microturbines operate on a number of fuels, such as natural gas, propane, biogas and liquid fuels like diesel, kerosene, and aviation fuel. Waste gasses that would otherwise be released directly into the atmosphere are instead burned, making for a cleaner solution. With a 1MW engine that is made up of five independent engines, the Capstone Microturbine has a maximum failure point of only 200KW. Growers that use the Capstone Microturbine do not have to invest additional capital in backup generation, and they are capable of staying online even during extended power outages.
5. Environmental Sustainability
Despite using a carbon fuel to generate electricity, overall system efficiency is still significantly improved with cogeneration. This has a lot to do with where the energy is generated. Generating energy at a power plant offsite leads to losses in transportation, as the energy must make its way through the grid before it can be used. Cogeneration generates energy in a more efficient manner. It also enhances grid efficiency when calculating carbon from site to source. As a whole, CHP leads to reduced emissions, smaller carbon footprints, and increased energy savings for controlled environmental agriculture businesses.
Mounting evidence shows that now is the time to invest in combined heat and power solutions. Low natural gas prices and high electricity rates make investing in on site power generation a smart decision for businesses in the indoor agriculture industry. Combined heat and power systems provide an exceptional value for growers that demand the highest efficiency and quality.
KMB is a leader in combined heat and power solutions, with experience working alongside cannabis growers of all sizes to cut costs and speed up time to market. At KMB, our modular grow systems are fully-containerized, and our engineers actively collaborate with project developers to take a holistic approach to power generation. We are experienced in providing assistance on all aspects of CHP implementation, including assessing project feasibility, sizing equipment, and calculating lifecycle costs.