A relatively new industry known as Controlled Environment Agriculture (“CEA”) embodies the consumer’s desire for local and organic food, and also accommodates the legal growth of recreational cannabis in many states. The push for locally-sourced foods and other commodities appears to be an enduring trend, both for the provision of higher quality products and for shoring up the supply chain, which showed its fragility during COVID-19.

CEA facilities are appealing on a number of other levels as well. Compared to traditional agriculture, they can produce up to 20 times the volume of fruits and vegetables in an equivalent footprint. They reduce pesticide usage, don’t pollute local waters and have shorter supply chains. A number of challenges are inherent in CEAs, however. While indoor farming is a booming new market segment, it has massive energy needs. Additionally, many CEA facilities emit enormous quantities of carbon dioxide, a greenhouse gas tied to global warming, which keeps the industry from making blanket sustainability claims.

To accommodate this new industry, large non-urban/rural greenhouses and smaller urban greenhouse structures are proliferating. Large-scale, non-urban/rural greenhouse facilities tend to be constructed in green spaces where there is room to build large structures. By contrast, smaller urban greenhouse facilities are becoming part of a new community ecosystem in traditional rust belt neighborhoods as a means to bring food sources and new business ownership opportunities to communities. Both types of greenhouses are electric-intensive operations, as they depend on lighting to maximize plant growth. Electricity for greenhouse lighting and water pumps is often estimated at approximately 30% of a CEA facility’s operational cost.

Non-urban/rural greenhouse facilities often exist on the edge of the electricity grid where capacity can be an issue, and frequent outages may occur. These greenhouses require stable electric transmission and distribution systems which may or may not exist. If the infrastructure does not exist, the financial responsibility to study available capacity and to provide electric service to a given site falls to the developer. Pairing the CEA facility demands for energy with an unstable electrical infrastructure can be a recipe for disaster. A sustained power outage could cause spoliation, product loss or even ruin an entire crop. Utility-driven improvements to these non-urban greenhouses often don’t make economic sense, and it may be difficult to justify the cost given that only a small percentage of ratepayers benefit.

Microgrids Powered by Combined Heat and Power Systems as a CEA Energy Solution

Microgrids can often be a solution to enhancing these facilities’ utility needs while offering reliable energy supplies, as they can be designed to offer loads of both heat and electricity. As discussed in greater detail in our August 8 Renewable Energy Post, microgrids are miniature power systems that serve an individual facility or area with electricity, either on its own or in concert with a larger power grid. Typically, a microgrid consists of a modular substation, a co-located generation source and energy storage that can power a building or community and can be islanded from the larger grid enhancing resiliency at the point of need. Microgrids can be comprised of many other things, including:

  • Distributed energy resources such as solar panels, battery storage systems and fuel cells
  • Electric vehicle chargers and other connected devices
  • A centralized microgrid controller that allows the operator to coordinate the distributed energy resources for site use and revenue-based grid support
  • Ownership flexibility including community groups, developers, economic development agencies, energy service companies and even local utilities

The increasing prevalence of small microgrid structures powered by clean energy sources such as combined heat and power (“CHP”) systems has created an expanded interest in greenhouse construction. Because CEA facilities require both electricity and heat, these CHP systems can be an excellent solution. CHP plants with natural or renewable gas-fueled engines sequentially generate several types of energy in a single integrated system. This is different from conventional electricity generation systems where much of the energy potential ends up as waste heat. Along with electric generation that would take advantage of thermal load for heating and cooling (e.g., absorption chillers), a properly designed microgrid for greenhouse applications would also entail carbon dioxide and condensate recapture, which enhances plant growth and total energy optimization. Lastly, CHP systems provide flexibility in terms of fuel source evolution as we explore the potential of a natural gas transition to non-fossil fuels such as renewable natural gas and hydrogen while expanding our options from a limited fuel point of view to one that understands the merit of a total energy solution.

The Business Case for Microgrids

The Inflation Reduction Act, signed into law by President Biden on August 16, 2022, is expected to significantly reduce the cost of microgrids through the implementation of new tax credits and extending existing tax credits for microgrid technologies, including solar, storage and microgrid controllers. By providing tax credits, U.S. Congress has created regulatory certainty in an area where there has been only sporadic federal support for renewable energy.

Tax credits can become the basis of financing packages offered by microgrid developers, proposing options from ownership to leasing to energy-as-a-service. Energy-as-a-service is a relatively new business model where the developer builds, owns and operates the microgrid. A CEA facility that elects energy-as-a-service avoids making a large capital investment and instead pays a monthly operating expense to the microgrid developer or operator.

Greenhouses meet the consumer’s desire for local food, as well as serving a myriad of other purposes. Urban greenhouses bring healthy, affordable produce to food deserts — geographic areas where access to it is limited. They reduce supply chains and the attendant pollutants, including carbon dioxide. And as climate change brings increasingly unpredictable and extreme weather, greenhouses can regulate heat, cold and water in a closed-loop agricultural system. Microgrids, particularly those powered by CHP systems, offer an excellent opportunity for CEA operators to meet their customers’ needs while taking control of their energy supply and cost.

Aligning State and Federal Policies with Microgrids

Along with the Inflation Reduction Act, microgrids can be utilized to advance the implementation of initiatives such as smart growth and recreational cannabis, not to mention general economic development marketing. In New York State, recreational cannabis was signed into law on March 31, 2021, under the Marihuana Regulation and Taxation Act, and the New York State Smart Growth Public Infrastructure Policy Act was signed into law in 2010. Just like other plant-based greenhouse operations, cannabis growing is energy intensive. Smart growth principles involve economic development backfill, which relies on available space and energy infrastructure and tends to highlight rust belt neighborhoods where community revitalization and decarbonization would benefit disadvantaged communities. New York State’s Climate Leadership and Community Protection Act, signed into law in 2019, dictates that up to 40% of the climate spending must benefit disadvantaged communities. To do this, electric infrastructure and capacity is not optional. It is critical that solutions for economic growth, infrastructure, decarbonization and community revitalization leverage federal and state initiatives as they are not mutually exclusive from the consumer (ratepayer/taxpayer) perspective. As is our constant theme in this blog series, economic and environmental sustainability must be in sync if either is to be successful, and this includes a critical review of current regulatory and legislative activities.