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This article analyzes profitability impacts as they relate to your business by providing a knowledgeable look at the technologies accessible to all sizes of operations and describing the relative economics for various systems.
By providing a knowledgeable look at the technologies accessible to all sizes of operations, and describing the relative economics for various systems, this article analyzes profitability impacts as they relate to your business. Other topics discussed include: the impact of short-term cost savings compared to long-term profits when it comes to heating, ventilation, and air conditioning (HVAC) selection; the ways in which HVAC economics play a large role in profitability; real-world case studies to illustrate concepts in action; and codes and regulations associated with grow room design that should have an impact on HVAC decision making.
In cannabis cultivation, heating, ventilation, and air conditioning (HVAC) systems will be one of the largest expenses your business comes across when you consider the upfront purchase and installation costs alongside long-term operating and maintenance costs. HVAC system design can affect almost every aspect of your business and business goals, from scalability for future growth to meeting sustainability goals. Because of the significant impact on your budget and your day-to-day operations, it is vital to select an HVAC system that will help optimize your operation from the start.
All other considerations aside, all of the systems you select and design for your facility must make economical sense or they won’t make sense at all. Taking the bottom line of your business into consideration is perhaps the most important factor when it comes to system selection, for HVAC and beyond. To optimize your cultivation operation, you must find a balance between cost and efficiency. Considering both the short and long term impacts of your HVAC decisions will lead to success for your business.
Because of the important environmental factors that accompany cannabis cultivation (such as temperature, humidity, and so forth), HVAC performance can truly make or break the success of your operation. Your HVAC system directly controls temperature and humidity and therefore the ability of your HVAC system to control these factors can directly impact your cultivation process. There are many elements to consider to select an HVAC system that will help optimize your operation, but ultimately it will depend on the unique needs and goals of your business. Unfortunately, there is no “one size fits all” approach.
Budget is something to keep in mind throughout the entire system selection process. When considering budget, think about both the upfront costs and long-term cost effectiveness. If a system costs more upfront but is more efficient and will save money in the long term, it may be worth the spend. On the other hand, be cautious of buying a more expensive system because of popularity or branding traps. The equipment you select and systems designed as a result must make sense for your unique operation.
Including engineers in the design of your cultivation facility offers the opportunity to design systems specifically for your business that consider your budget, facility size, geography, and other important factors. Energy models are also an important step in analyzing an operation, which can investigate different technical and economic conditions at play. An energy model is a simulation of a building that attempts to estimate the energy consumption of the facility, including the impact of various energy related items such as building fenestration, insulation, air conditioning, lights, and hot water. These can be very simple or more detailed, depending on the goals of the operation.
As engineers, we generally consider three factors when making system selection recommendations: first cost, annual costs, and payback. First cost includes the cost of the equipment as well as the cost of labor for contractors to install the system. Annual costs include energy costs (derived from energy modeling) and maintenance costs to keep the system functioning as designed. When we look at these two costs together, we are able to determine the payback period, which gives us information to help optimize your cultivation operation and your budget.
The time it takes to recover the additional cost through savings is called the payback period. As an example, imagine you are comparing two systems, System A and System B. System A is the least expensive and least energy efficient system. Often times this is a system that meets the energy code minimum, and no more, or perhaps it’s the system that is currently installed at an existing facility that is looking at upgrades. We call this the “Base System.” System B is more expensive, but also more energy efficient. Most people will understand that System B will cost less to run, but it’s hard to know if it’s really worth it to spend the extra money to purchase System B. With the help of a simple energy model, we can estimate how long it will take you to recoup the money you spent on System B, as compared to System A. The result is what we call the payback period. As seen in Figure 1, it will take 0.5 years to payback the initial investment of the more expensive, more energy efficient system.
We have put together four system case studies to highlight the impact system selection can have on your bottom line. Between all four systems, we are looking to compare first cost, annual energy costs, maintenance costs, and payback. Specifically, we are comparing them all to System 1, which we call our baseline system.
Please note that the payback dollars were calculated utilizing a number of assumptions, including a geographical location in Sacramento, California. These results are tied completely to the specifics of this example or model, so we caution you in using these results for your facility. The purpose is to highlight that working with your engineer to understand the long-term costs of your system can significantly impact your bottom line.
System 1 is an HVAC system with the lowest first cost of any of the systems included in this case study (Figure 2). This is called the baseline system as it’s the system to which all other systems will be compared. It includes residential air handlers with direct expansion air conditioning units (DX condensing units) and standalone dehumidifiers. This is a residential-style system, where condensing units reject heat from the space using refrigerant pumped between an indoor fan unit and condensing unit. The dehumidifier’s purpose is to give the system extra capacity to remove moisture from the air.
With a relatively low first cost of $220,000, but an annual energy cost of $265,000, System 1 results in an estimated five year cost of $1.545 million (Figure 3). Other variables that could impact the first cost and operational costs of System 1 include code considerations, which may require additional equipment and impact the first cost, such as the potential requirement for air side economizers, as well as the varying levels of efficiency available in this type of equipment.
System 2 is a popular system for cultivation facilities that uses basic fan coils, an air-cooled chilled water system, and standalone dehumidifiers (Figure 4). The chiller produces chilled water, which is then pumped to fan coils that absorb the heat from the space. The standalone dehumidifier removes excess moisture.
Though System 2 has a higher first cost of $536,000, the annual energy cost comes out comparable to System 1 at $258,000, resulting overall in a higher five year cost of $1.826 million (Figure 5). Other variables that could impact the five year cost of System 2 include code considerations, which may require additional equipment and impact the first cost and payback. These can include things such as the addition of variable speed pumps or a drycooler for free-cooling mode, which would add first cost but decrease energy costs. Another potential drawback when comparing this system to Systems 3 and 4, which we introduce below, is that tight temperature and humidity setpoints can be difficult or more costly to achieve. In addition, modifications need to be made to this system if you are in a cold climate, which could add to first cost and increase the energy cost, thereby increasing the five year cost of this system.
System 3 is a highly efficient packaged unit with modulating compressors and hot gas reheat for humidity control (Figure 6). This system uses hot gas reheat as the dehumidification process, which is more efficient than the standalone dehumidifiers seen in the last two systems. In a typical system, either dehumidifiers will be utilized to handle the dehumidification load (not very efficient), or the HVAC system will continue to cool the air to remove moisture in the room, resulting in subcooling the air which means heat will need to be added back into the room. Normally, the compressor heat goes to the condenser and is rejected out of the room. In this example system, the cooling coil subcools the air to remove the moisture from the air, then the hot gas reheat function utilizes the heat rejected from the compressor to reheat the air to a desired supply air setpoint as dictated by the cooling requirements of the space, adding to its efficiency and allowing for tighter temperature control.
System 3 also uses inverter driven compressors, which are more efficient and offer better temperature control. This type of compressor uses a drive to control the compressor motor speed, regulating cooling capacity.
System 3 has a first cost of $377,000 and an annual energy cost of $202,000-lower than both System 1 and System 2. The estimated five year cost of this system is $1.387 million (Figure 7). Other variables that could impact the five year cost of System 3 include physical considerations regarding where units need to be located, as well as utility incentives which could lower the first cost significantly. Additionally, this assumes no redundancy which could impact the first cost of this system, as additional units or controls may need to be considered if redundancy is a requirement of the facility.
System 4 is a high end system with a high first cost (Figure 8). The system uses heat pumps with a cooling tower and hot gas reheat for humidity control. The cooling tower rejects the heat from the indoor system to the outdoors.
System 4 has the highest first cost at $617,000, but a relatively low annual energy cost of $231,000, resulting in an overall five year cost of $1.772 million (Figure 9). Other variables that could impact the payback of System 4 include physical considerations regarding where the units need to be located, simplified controls with tight setpoint control, as well as utility incentives which could lower the first cost significantly.
Remember that when we introduced the idea of payback at the beginning of this article, we defined the payback period as the time it takes to recover the additional cost of a piece of equipment as compared to a baseline system through savings. When you look again at Figure 9, you can conclude a few things:
A few other conclusions, as depicted in Figure 10 include:
As outlined above, there are many factors to keep in mind when selecting an HVAC system for your cannabis facility. First costs, annual costs, and payback all need to be considered to find the balance between cost effectiveness and efficiency that is right for your unique operation. It is also important to think about your set point precision requirements, code requirements, and redundancy requirements, which are often different from business to business.
We advise our clients to be skeptical of any “one size fits all” system type, as the right decision for your facility is highly dependent on your unique operation and business goals.
Whether you have an existing facility or are looking at building a new facility, making informed decisions about your HVAC system can have a significant impact on your bottom line. Your HVAC selection can directly impact the profitability and growth of your business.
Laura Breit, PE, is a professional engineer with Root Engineers in Bend, Oregon. Direct correspondence to: firstname.lastname@example.org
L. Breit, Cannabis Science and Technology2(6), 36-41 (2019).