Lesson Learned from a Decade in CEA: Part 1
In the mid-20th century, NASA embarked on ambitious projects to grow plants in space to provide astronauts with a sustainable food source during prolonged missions. These experiments led to significant advancements in indoor lighting and hydroponic systems, technologies that would later revolutionize agriculture in controlled environments on Earth.
Interestingly enough, it wasn’t the food or floriculture markets that first picked up on these advancements, but rather illicit cannabis growers. Cannabis prohibition forced innovative cultivators to move their operations indoors to avoid detection. With legalization in states like Colorado, Oregon, and Washington, the industry emerged from the shadows, bringing a wealth of expertise in controlled growing environments.
Early on, high cannabis prices meant growers could not lose money (barring a catastrophic crop failure). Data from Cannabis Benchmarks pegged average wholesale prices for a pound of cannabis flower at $1,789 in 2016, with average highs as much as $2,100. During this Green Rush, investment dollars flowed into purpose-built facility construction and retrofitting projects.
At the same time, indoor agriculture technology experienced a boom not seen since the Space Race. The advancements in LED lighting, mechanical cooling, environmental control and monitoring, and vertical growing technologies over the past decade can nearly all be tied to the growing cannabis market. Wholesale prices have since cooled (in 2023, the average wholesale price for flower was $1,019), yet cannabis remains a cash crop where innovation abounds.
In the decade that I’ve been involved in the cannabis and broader controlled environment agriculture (CEA) space, I’ve found that there is a misconception that these markets share few parallels. The cannabis cultivation market and the food/floriculture industries are mostly two sides of the same CEA coin, and there are insights and lessons that crop and flower producers can learn from cannabis growers.
Bridging the Gap between Cannabis and the Broader CEA Market
My experience as both a cannabis grower and Director of Horticulture at Pipp Horticulture has led me to develop a nuanced understanding of the CEA landscape and how cannabis fits within it as the outlier. To appreciate this, we should first zoom out and define what we mean by CEA and indoor farming.
Controlled environment agriculture is a technology-based approach to crop production that involves the control of most (if not all) plant growth variables. This includes lighting, temperature, humidity, irrigation, fertigation, airflow, CO2 supplementation, and more.
CEA can broadly be divided into two categories: indoor farms, and mixed-light structures. Mixed-light structures utilize both natural sunlight and artificial lighting to optimize plant growth. These facilities provide the benefits of natural light while allowing for environmental control through supplemental artificial lighting.
Greenhouses are one form of mixed-light facility. These are structures with walls and roofs made chiefly of transparent material such as glass or plastic in which plants requiring regulated climatic conditions are grown. Greenhouses can range from small, simple structures to large, high-tech installations, and they can be leveraged with or without supplemental lighting.
Hybrid mixed-light structures have a glass roof allowing sunlight to penetrate and insulated walls to better control the environment. These facilities combine the benefits of natural sunlight with enhanced climate control to optimize plant growth.
As opposed to mixed-light structures, indoor farms rely solely on artificial lighting. These are sometimes referred to as urban farms, vertical farms, and container farms.
While approaches to cannabis cultivation are broadly similar to food and floriculture production in mixed-light structures, cannabis indoor farms are unique in that they often are at the extreme of plant production levels. From lighting, CO2 supplementation, nutrient uptake, irrigation, and latent heat load management, these structures can be extremely energy- and resource-intensive. Some indoor cannabis growers operate their lights at intensities as high as 1,800 PPFD, which increases transpiration rates, latent loads, and nutrient delivery needs.
The cannabis plant’s ability to thrive in these environments and the dollar value crops can generate justify these large inputs. Produce or cut flower indoor farms are generally less energy-intensive than cannabis farms due to economic and crop limits (i.e. plant stress would negatively impact yield and quality in those conditions).
For these reasons, cannabis growers have been viewed as “lucky” to be able to make mistakes that would otherwise bankrupt an indoor food production business. Conversely, indoor farmers growing crops other than cannabis have been told for years that their methods aren’t feasible without the benefit of a cash crop. There may be some truth to both sentiments, but the fact that these industries continue to evolve in parallel remains true.
Lessons from the Cannabis Industry for Other Indoor Farmers
Budget for consultants and SMEs
In my time as a cannabis grower, I was fortunate to have the opportunity to design my own indoor farm. Due to the extensive licensing process, I had a lot of lead time to build my knowledge on the subject. Through my research, I discovered innovative indoor farming principles in both academic studies and online cannabis message boards. I studied cutting-edge technologies such as LED lights and environmental controllers. I drafted plans, scrapped them, and drafted some more.
Additionally, following my career as a cultivator, my time at Inspire (my previous employer) and Pipp Horticulture granted me the opportunity to impact the designs of hundreds of facilities.
These experiences taught me that you shouldn’t let your head grower be your design-build expert.
In the early legalization days, private investors looking to tap into the Green Rush, none the wiser, would sometimes give full design control to growers who presented a “fake it ‘til you make it” attitude. Even architects and systems designers, who had no experience with cannabis, deferred crucial decisions to these “experts,” sometimes leading to millions of dollars in losses due to design-build errors and missed opportunity costs.
To be fair, few technologies were purposely designed to address the needs and realities of commercial indoor cannabis environments, and little knowledge was available about growing the plant at such scales. High-intensity discharge (HID) lights such as high-pressure sodium (HPS) fixtures were the industry standard. These systems emit significant amounts of heat, increasing cooling costs, and preventing growers from leveraging vertical racks to maximize the use of their floorspace. HVAC systems were not yet optimized for a cannabis grow’s latent load, either, leading to plant health issues and forcing growers to rely on multiple technologies to manage humidity.
Indoor farms today have the benefit of being able to learn from the cannabis industry’s growing pains. Many design-build experts and consultants with hands-on indoor farming experience can inform your decisions, as it is often easier to dial back systems and controls from the extremes present in cannabis cultivation environments.
High-efficiency LED fixtures have drastically cut the sensible heat load compared to their HID predecessors. High-efficiency, specialized HVAC units able to manage both latent and sensible heat loads have become widely available. Even vertical racking units designed for cannabis grows (such as Pipp’s Vertical Grow Systems) have evolved from simple mobile shelving to sophisticated units that integrate in-rack airflow technology.
So, when designing an indoor farm make sure to budget for industry consultants and other subject matter experts no matter the crop you intend to grow.
Purpose Built is Easier than Retrofitting
In my time with Pipp, I’ve had the opportunity to help design countless facilities. Thanks to that experience, I can confidently say that building a purpose-built facility from scratch is much easier than retrofitting a space designed for another industry. Something as simple as column placement and spacing can greatly reduce your ability to leverage mobile vertical racks, cause airflow issues, and make it more difficult for employees to work with crops.
It’s important not to get enamored and purchase a location until you have a clear plan of what you want to build. For example, a site close to cheap utilities and a growing customer base may be rendered useless by the lack of outside or rooftop space for the HVAC equipment you will need to maintain your crop’s ideal climate. Similarly, an urban location may not have the parking space to accommodate staff adequately. While a seemingly silly reason to turn down an otherwise acceptable facility, keeping employees happy and safe will greatly reduce turnover. Designing a bespoke facility on a lot that meets your operational and employee needs can help avoid headaches when you’re up and running.
Additionally, older facilities may not have the necessary utilities (water, power, and/or natural gas) to support an indoor farm, and the costs to increase the amount of those utilities delivered on-site may exceed those for setting up new purpose-built connections. It’s important to engage with utility companies and city building departments as early as possible to identify existing and upcoming sites that are suitable for your grow at the scale you wish to build.
(Side note: Some sustainability-minded operators may think that lack of electricity may be easily supplemented by solar panels. However, it’s important to consider that every 8,000-10,000 square feet of cannabis canopy needs approximately an acre of solar power arrays.)
Build a Realistic Business Plan
Produce and floriculture growers already know how tight their margins are. Running an indoor farm that can’t reduce costs by relying on the most abundant source of natural light (the Sun) will be difficult in the best of circumstances. That’s why it’s important to adopt a “buy once, cry once” mentality when designing a facility and weighing which systems to adopt.
Many early commercial cannabis growers made that mistake. Trying to balance out the volatility risks of changing regulations and price drops, several cannabis operations value-engineered their builds by under-sizing HVAC units, opting for less efficient light fixtures, or selecting fixed vertical racking systems that didn’t allow them to maximize their floor canopy. The low CapEx investment led to higher OpEx costs and product quality issues, making them unable to compete with businesses that made larger CapEx expenditures and had lower operating expenses.
Due to the even tighter margins that exist outside of cannabis, indoor farmers have to go all-in by opting for the best systems they can afford. If budget constraints force you to make value-engineering decisions, aim to save money in areas that are easiest to retrofit, such as lighting fixtures. Many utilities will offer incentives for growers to adopt higher efficiency systems, making the most advanced systems more affordable when you’re ready to make the jump. However these programs usually expire, so growers cannot wait forever to make those upgrades.
HVAC systems and floor planning, on the other hand, must be done right the first time as those are harder, if not impossible, to change after the fact. An undersized HVAC system will constantly operate at near capacity, increasing energy costs and wear. Meanwhile, floor plan changes usually require facilities to shut down all or part of their operations to make the necessary fixes.
The lessons and similarities between the cannabis and broader CEA industry don’t end here. In part 2 of this blog series, we will explore lessons that cannabis operators can learn from their food and floriculture cousins. As these industries continue to co-mingle, CEA as a whole can achieve its potential to maximize efficiency, increase profits, and build a better food, pharmaceutical, and floriculture supply chain.
