With energy rates on the rise, small and large businesses alike are turning to renewable energy sources to lower their overhead costs. Setting up a solar cannabis facility is a great way to do this, but that’s just not feasible for some smaller cannabusinesses with little to no capital on hand.
Fortunately, there’s a solution. With a power purchase agreement (PPA), cannabusiness operators can power their facilities with solar energy without paying up front for a solar system of their own.
Read on to learn more about what a PPA is and how it can help cannabusinesses with little to no capital set up solar cannabis facilities.
What Is a Power Purchase Agreement?
A PPA helps operators set up solar cannabis facilities for discounted energy rates without having to purchase their own solar energy systems up front. Or, in the words of Justin Miller, CEO of High Life Solar, it’s “an easy way to lower monthly utility overhead while not needing to pay cash for the system.”
When High Life Solar establishes a PPA with a cultivation, the company leases land from that cultivation and installs a solar system on it. Then, High Life sells the energy that system produces to the cultivator at a significantly discounted rate.
For example, if the utility company sells power for $0.15 per kWh, High Life would sell the cultivator power for $0.08 per kWh instead.
Since the PPA contract typically lasts 15-30 years, those initial savings only increase over the lifetime of the system as the PPA protects the solar cannabis cultivation from unpredictable utility rate hikes.
Who Does a PPA Benefit?
While Miller recommends owning your own solar system if you can afford it, for many cannabusinesses, a PPA makes more sense. And for some, it’s the only affordable way to set up a solar cannabis facility.
Both options will save you money on energy. With a PPA, those savings are immediate — your very first bill will be significantly lower than what you were already paying the utility company.
The savings from purchasing your own system can vary depending on your typical utility usage and trending utility costs in your area, but in Miller’s experience, the average ROI on a solar system is around six to eight years.
Ultimately, the deciding factor comes down to capital. Buying a solar system is an upfront cash investment, and not every cannabusiness has that cash readily available.
A PPA is a great solution for people who want to lower their monthly overhead by transitioning to a solar cannabis facility but can’t afford to buy their own solar energy system.
Why Use a PPA to Set Up a Solar Cannabis Cultivation?
Beyond the financial savings, setting up a solar cannabis facility using a PPA has a number of benefits, especially for small businesses and startups, including:
- Accessibility: Many cannabis startups don’t have much capital to work with and can’t get solar loans because cannabis is still federally illegal. A PPA makes solar energy affordable even without those loans.
- Environmental consciousness: Even a small startup with limited capital can become a solar cannabis business and help protect the environment by saving energy — which is great for the planet and for PR.
- Sustainability: Currently, degradation of a solar system happens at around 25-30 years. But there are systems from the 1980s that still produce power, and solar technology is only getting better. Using a PPA can be a low-cost way to set your cannabusiness up to last for decades to come.
To that last point, Miller adds that the solar industry itself is heading in the direction of full sustainability with recent developments in solar panel recycling. By setting up a solar cannabis facility, with or without a PPA, you’re helping build a more sustainable future for us all.
As for the downsides of getting a PPA, Miller says there really aren’t any, especially for those who can’t afford to purchase a system of their own.
Even if you need to sell your solar cannabis facility before the PPA expires, it shouldn’t be too difficult to find a buyer who’s willing to inherit the PPA — in fact, most people will see it as a positive selling point.
No Capital? No Problem!
PPAs make solar energy accessible to cannabusiness owners who can’t afford to buy their own systems and have difficulty obtaining a solar loan. While a PPA may be more advantageous to some businesses than to others, there’s really no downside to powering your cannabusiness with solar energy.
To get started transitioning to solar energy with a PPA, reach out to our partners at High Life Solar.