Shedding Light on the Lighting Crisis in the Canadian Cannabis Industry

There’s More to the Story Than Meets the Eye

Property insurance rates are skyrocketing across the Canadian cannabis industry. Why is that, and what can be done to address it?

While everything happened pretty quickly in the wake of cannabis legalization in October 2018, the sobering reality of the industry’s risks is now settling in. This past year has seen the troubling trend of large-scale fires at Canadian licensed producers (LPs). Such fires have become the number one cause of property loss across the cannabis industry and have been overwhelmingly attributed to inferior lighting and inept electrical installations.

There are four main lighting choices available to Canadian cannabis cultivators:

• Light-emitting diodes (LEDs)
• High-pressure sodium (HPS) lamps
• Metal-halide (HID) and Ceramic Metal Halide (CMH) lamps.
• T5 Fluorescents (T5)

LEDs are the relatively new kid on the block, uniquely advantageous in that they can deliver a wide range of colour temperatures, do not include any type of filament, and produce minimal heat. This means they are more energy-efficient, require less supervision and maintenance, and boast longer lifespans than HPS or MH lamps.

HPS lamps are arc lights that send an electrical charge through pressurized gas. They are more cost-effective than LEDs but less energy efficient. They are, however, limited in their colour temperature range and much more difficult to safely maintain, as their glass bulbs are prone to explode if not correctly installed or maintained. While HPS lights have been the culprit behind several major fires in the Canadian cannabis industry, mainly due to operator error or poorly manufactured components, this danger is even more pronounced in MH lamps.

Another type of arc light, HID (high-Intensity discharge) lamps, can be desirable in LPs due to their high colour temperature. Some legacy growers believe that specific strains perform better with HID setups, while others feel that certain lights work better at different stages of the grow cycle (i.e. vegetative stage versus flower stage). But if implemented haphazardly, the attempt to leverage such advantages can come at a very high cost.

Most insurance professionals agree that MH lamps are the worst culprit in terms of lighting risks. “We’ve also had losses with LED, but that comes back to some sort of an electrical problem,” says Kelli Hunt, Vice President of Underwriting at Next Wave Insurance Canada. “LED lights are not as finicky as metal halide—you get one inch of a fingerprint on a metal halide bulb, and you’re very likely to have that bulb explode at some point or another. Their life expectancies are also not what they are portrayed to be, and there are varying qualities of these bulbs—you can get cheap ones or expensive ones, and you get what you pay for.”

T5 Fluorescent lights are typically the least expensive option available and do boast a long expected life. The main issue is that T5s do not perform well compared to other lighting systems during the flowering or vegetative stages of a grow cycle. They are an option during the propagation stage of the plant, however, and are relatively low risk when it comes to a potential fire hazard. These lights have historically been used by old school do-it-yourselfers and some legacy growers who are mindful of their costs.

So, is LED lighting simply the best solution for your grow-op?

The answer is not so simple. Although many underwriters would prefer to see LED lights used exclusively, many growers are not in a hurry to change what they are accustomed to. Moreover, master growers who carefully manage traditional arc-based lighting systems can do very well with them.

And there is more to the story than lighting. As Ron Berkhout of Inhuis Contrived Inc. advises, other factors that need to be contemplated when reviewing operational exposure in a grow environment include:

• What are you growing, and how are you growing it?
• How are you controlling your environment?
• What are you trying to achieve? High yield? Specific cannabinoid or terpene profile?
• How are you spacing your plants?
• What is the distance between the top of your plants and the light source?
• How are nutrients delivered? Hand watering? Drip Irrigation?
• Is plant transpiration rate measured properly?

Lighting systems play a key role in all of the above.

According to Bob Bousfield, VP Property Practice Leader at SUM Insurance, and Janet Colbourne, Assistant VP at Property underwriting, humidity levels and airflow/exchange are also risk factors that should be considered and continually monitored. Whatever lighting, product and environmental options you choose, it is crucial to engage the right people on the engineering and risk fronts and to have the appropriate suppliers, team, and plan in place to mitigate fire risks.

Diligence is key. Get involved with cannabis risk assessment experts with regard to lighting as well as facility retrofitting and power loads on your electrical systems. For example, expanding a setup that was properly installed years ago might involve new equipment that can introduce unsafe loads to your electrical system, again increasing the risk of catastrophic fires that lead to increased insurance rates across the industry.

You should also ensure your maintenance program includes the timely replacing of HPS or MH bulbs, thoroughly reviewing your environment (HVAC and power) if your setup changes, and implementing robust monitoring procedures to ensure your facilities are protected even when no one is on-site.

Finally, it should be noted that many insurers are now requiring LPs to sign warranty statements to ensure they have some of these risk management practices in place. If there is a loss and it can be proven that the LP was not following the procedures described in their warranty statement, then coverage could very well be denied. This can become a big issue when changes are made to the growth environment without disclosing such changes to your insurer and is another example of why diligence is so important in this growing industry.

While the goal of any grower is to optimize product quality and yield, lax safety standards and cutting corners can seriously increase the chances that your plants and your investment may go up in smoke.