Over the past several years there have been extensive changes in the cannabis industry. "In 2013, when the industry was just starting to roll out, the market was such that an operator could build almost anything and make money. Utilizing mechanical systems like mini-splits or direct expansion cooling (DX) with supplemental dehumidification weren't bad options because the price of flower was high enough to support yields at any level," the urban-gro team explains.
Facility layouts didn't matter much either. "Most facilities were designed by unqualified consultants with no Controlled Environment Agriculture (CEA) experience. These consultants generally understood plant metrics and movement, but spatial sizing and functional flow knowledge quickly fell to the wayside in post-harvest processing and operations. On the other hand, architects understood buildings and lean manufacturing principles; however, their knowledge of cultivation methodologies, metrics, plant movement, and post-harvest processing was non-existent. While familiar with human behavior and indoor climate requirements, engineers didn't understand plants, transpiration rates, and the capability of various systems to address temperature and humidity levels."
Fast forward to 2023/24. Flower prices in mature markets have dropped dramatically over the good old days. Using Massachusetts as an example, in the 2017 market wholesale flower averaged $4,500 a pound wholesale. "Today operators are lucky to get $2,800 a pound for top-shelf products while mid-grade product averages about $1,200 a pound. Utilizing these numbers, it's easy to see how quality and quantity impact revenue."
A tale of two facilities
To dive deeper, urban-gro has a comparison example (realizing there are always conditions that may exist outside of the "norm"). "Let's assume we have two facilities with the same layout. Facility A utilizes a mechanical system comprised of standard DX with supplemental dehumidification. Facility B utilizes a 4-pipe air-cooled chiller system. Air distribution from both systems is through ductwork. In Facility A, dehumidification is provided via supplemental units at the unit location where air is drawn into the unit and distributed from the unit. Distribution of the dehumidified air is based on air movement within the room created by wall and/or ceiling-mounted fans. In Facility B, utilizing a 4-pipe system, dehumidification is accomplished as part of the system's environmental control. Air distribution throughout the room via ductwork is correct for temperature and humidity. Thereby, utilization of a properly designed 4-pipe system will generally provide a more accurate and level control of environmental parameters throughout the room. This is also true based on the system operation utilizing values that adjust flow versus the DX systems cycling on and off."
Based on historical data, Facility A will produce somewhere between 50 – 60 grams / sq. ft. per harvest, urban-gro says. "Facility B will produce somewhere between 65 – 75 grams / sq. ft. per harvest. Using averages, we'll assume 55g/sf for Facility A and 70g/sf for Facility B. Let's assume our facility has 8,000 sq. ft. of flower canopy spread over eight 1,000 sq. ft. canopy rooms. Let's also assume our cultivation methodology runs on an eight-week harvest schedule. We'll factor in two weeks of lost time over the year for cleaning, flipping rooms, and other maintenance and operational needs. Based on the above, Facility A will have an annual production of 5,064 lbs. while Facility B will yield 7,726 lbs. With the systems utilized as noted above, Facility A produces mid-grade products with annual revenues from flower at approximately $6,076,800 while Facility B, with its top-shelf flower, would generate approximately $21,632,800."
Obviously, there is far more that goes into producing top-shelf products than just mechanical changes. "However, the ability to seamlessly hold the environmental parameters at near flatline is one of the many positives of a water-source system. The decision to utilize lower-grade systems is generally based on capital investment. In our example, the only variable is the mechanical equipment. Utilizing our 8,000 sq. ft. of flower canopy in each facility we can assume a total canopy of 11,400 sq. ft. Utilizing an efficiency factor of 74% our total room square footage would equate to around 15,400 sq. ft. Based on these assumptions, we can look at the potential difference in CapEx based on standard DX vs a 4-pipe air-cooled chiller system. For Facility A our cultivation investment would cost around $2,233,000 while Facility B would total about $4,774,000. Considering the difference between these systems, we can assume Facility B has operational savings based on lower costs, plus the advantage of potential energy rebates."
Informed decision-making for cultivation projects
According to the urban-gro team, the early investigation of capital investment, operational costs, potential rebates, maintenance costs, potential yields, and product quality should all be topics of discussion before determining a direction forward. "With experience designing, equipping, integrating, building, and optimizing more than 1,000 CEA projects, let our seasoned experts guide you during the crucial design phase to make data-informed decisions that will positively affect your facility for years to come."
For more information:
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