LED rebate funding shortage leaves cannabis lighting vendors on hook

A rebate program aimed at encouraging indoor farmers – those growing cannabis and other crops – to switch to LED lights proved so popular that Minneapolis-based utility company Xcel Energy ran out of money to pay for it.

The funding shortfall has left cannabis ancillary companies such as Scynce LED on the hook for hundreds of thousands of dollars.

Mesa, Arizona-based Scynce LED has filed about $500,000 in unpaid rebates for lighting it shipped to clients before Xcel suspended the program in July.

“We found out we were not going to get paid until sometime in 2025, which blew up our budget for the year,” said Nick Pastushan, CEO and majority owner of Scynce LED.

“We’d already bought and paid for all these lights, and we even have amounts due to us from the 2023 (rebate) program that got carried over.”

How LED rebates work

When Colorado launched an LED lighting rebate program in 2022, Scynce LED worked with clients seeking to switch their grow operations to more efficient lighting systems.

Scynce paid for and installed the systems with the expectation that the company would be reimbursed through the rebate program rather than its clients paying cash for the work.

Indoor agriculture operations could earn up to 70 cents per watt installed of horticultural LEDs for retrofitting or new construction projects.

Retrofit project rebates are based on new LED products replacing the following lighting types:

• High-pressure sodium (HPS).
• Metal halide (MH).
• Ceramic metal halide (CMH)
• T5 or T8 with new LED products.

Rebate program under review

Xcel’s rebate program was offered to indoor farmers in Colorado, Minnesota and New Mexico, rolling out between July 1, 2022, and April 1, 2023.

Midway through 2024, Xcel notified participants that the program would be suspended because the utility company didn’t have the money to provide rebates for projects that already had been submitted.

Now, Xcel is in the process of conducting an internal audit of the LED lighting program to better understand current and future demand.

“Xcel Energy’s energy savings programs are an important way we work with our customers and communities to save energy and help them save money,” Xcel said in a statement emailed to MJBizDaily.

The company said customers achieved high levels of electric energy savings through its programs much earlier in the year than is typical.

State utility regulators recently decided to allow Xcel to move $34 million from next year’s energy rebate budget to pay for the shortfall, but it’s unclear when participating companies such as Scynce LED will be paid.

“After a short pause in the company’s business electric energy efficiency programs, we are in the process of reopening many of these programs and are currently reviewing and starting to process applications received prior to the pause,” Xcel said.

“The popularity of our energy-savings programs is a testament to leadership in providing cost-effective measures that benefit all our customers.”

Cannabis operators see LED benefits

Meanwhile, cannabis growers who switched their lighting systems as part of the Xcel program say they have seen the benefits, with some reporting energy savings of 30% to 40%.

“It reduced our electric bill substantially,” said Ted Calvo, owner of Options Cannabis Co., a Colorado-based company that operates an indoor grow and marijuana store.

“The heat in the room goes way down by using LED lights,” he said, adding that LED lighting also has helped Options Cannabis reduce its costs for nutrients and labor.

Calvo said participating in the program has been well worth it, and Xcel has been a great partner.

“A representative came into our grow and looked to see what we needed, how they could assist and how many lights we would need,” he said.

“Xcel was really part and parcel of this.”

Financing LED lights

Henry Berman, chief customer engagement officer at Scynce, said that although Xcel’s rebates have hit a glitch, other programs available to cannabis cultivators can offset energy costs.

Boulder County, Colorado, for example, offers an additional rebate program beyond those that Xcel provides.

The Colorado Department of Energy’s Cannabis Resource Optimization Program (CROP) offers state-subsidized, low-interest financing for out-of-pocket costs that Xcel rebates don’t cover.

Sam Milton, founder of Maine-based energy and sustainability consulting firm Climate Resources Group, said Xcel’s program was among the most generous in the nation and was bombarded with applications when it was launched.

Milton said Oregon had a similar issue a few years ago, which resulted in caps on how much an individual project could receive.

“Everybody could get something instead of a small number of operators getting a huge payday,” Milton said.

“It makes it less lucrative for people to participate in, but it’s still good.”

Xcel, he said, could take similar measures.

“You’re going to see people not being able to give terms in the same way,” Milton said, “so costs will go up to customers, and less states will offer it.”

Margaret Jackson can be reached at ma**************@mj********.com.