Surna Brings Engineering Innovations to Cannabis Industry
November 10th, 2014
News, Top News
The cannabis industry isn’t exactly known for its energy efficiency. According to some researchers, the warehouses commonly used to grow marijuana in large quantities consume roughly as much energy per square meter as a high-end data center, already racking up some $6 billion per year in electricity costs. The industry’s rapid growth is stoking fears of further stresses on the grid.
In this article, we’ll take a look at a growing publicly traded company that currently provides engineering and equipment for the cannabis industry and is addressing these energy consumption problems with unique innovations.
Bringing Innovation to Cannabis
Surna Inc. (OTC: SRNA) is a Boulder, Colorado-based engineering and manufacturing company with a current emphasis on equipment and engineering for the rapidly growing $2.3 billion legal cannabis industry. With a focus on developing and/or acquiring disruptive technology, equipment, and related support services, the company’s goal is to bring new technology to the cannabis marketplace to make growing operations more efficient and profitable.
Since its inception, the company acquired the intellectual property portfolio of Safari Resource Group, which includes a patented reflector and other intellectual property in development. Management subsequently acquired Hydro Innovations to provide a solid base of rapidly growing revenue, supported by a complete lineup of indoor cannabis growing equipment.
Unique Industry Approach
Since much of the marijuana available today is grown indoors and therefore unable to utilize natural sunlight, cannabis cultivation consumes massive amounts of energy and places pressure on the grid. To provide sufficient amounts of light to the crop, many operations use 1,000-watt light bulbs that generate an incredible amount of heat. Typically this equates to approximately a half ton of heat per bulb that has to be removed by a climate control system. Climate control is the second most important factor in a cannabis grow operation due to the intense amount of heat that must be removed so as not to destroy the garden. With traditional HVAC systems, the removal of excess heat (heat exchange) occurs through the movement of air, which is highly inefficient and requires a large amount of electricity.
Surna’s technologies address these shortcomings by making water-cooled technology available and, more importantly, affordable through their climate control systems and a recently announced water-cooled light reflector.
Surna’s water-cooled technology does not exchange heat through the air but instead exchanges heat through water, which is a more conductive material. These thermal dynamics can save enormous amounts of electricity and thereby dramatically improve the economics of growing operations – particularly large ones.
The company’s technologies are also very competitively priced which is not typically the case with water cooled technology. For example, in a sample quote for a 200-ton system, Surna Chiller Systems are priced at $250,000 compared to $400,000 for a conventional HVAC system and $800,000 for a conventional chiller system. The lower price comes despite the use of high-quality, off-the-shelf components from companies like Daikin and Trane that make it superior to many competitors.
Surna’s reflector, expected to be available to large-scale commercial grow operations in the first quarter of 2015, utilizes water-cooled technology to eliminate heat directly from the source. This point-source heat removal eliminates the need to remove heat from the rest of the room, cutting back further on energy costs.
Existing & Growing Revenue
Surna’s existing and growing revenue base is unique among many development-stage companies within the cannabis industry. With the acquisition of Hydro Innovations, the company generated approximately $1,800,000 of revenue through the third quarter – and these figures don’t include any sales of its new, patented reflector technology.
Management expects the reflector to be a game changer for the industry. Given its ability to dramatically cut long-term cooling costs for the cultivation facility without the need for a large scale cooling system, the technology could generate significant interest among commercial-sized growing operations where electricity costs are huge and ever growing. These revenues could provide a near-term catalyst for the stock.
According to a recent press release detailing the reflector’s potential:
“The reflector uses a unique water-chilled system to greatly decrease cooling needs for a grow facility while adding features that provide a significant increase to the amount of light that hits the canopy. Although yet to be validated by third party testing, Surna’s engineering team expects that the water-cooled reflector will allow indoor grow houses to reduce energy consumption from cooling by up to 50 percent, and overall energy consumption by up to 25 percent, when combined with Surna’s proprietary water-cooled climate control system.”
Strong Management & Potential
The company’s management team is just as impressive as its growing portfolio of technologies. Chairman and CEO Tom Bollich is the visionary technologist that co-founded Zynga Inc. (NASDAQ: ZNGA), which became one of the largest IPOs in history and reached a $10 billion valuation. CFO Doug McKinnon has extensive C-level experience with both public and private companies across a number of industries, including CAO for a $12.5 billion dollar market cap NASDAQ company. General Counsel Tae Darnell is one of the most experienced cannabis industry lawyers, having founded the Cannabis Law Center in Denver where he helped guide hundreds of firms through that state’s ever-evolving regulatory landscape in addition to being involved in the actual legislative push.
VP of Engineering, Todd Whitaker, leads Surna’s team of 7 full-time engineers and brings a deep and highly technical background to the company, essential to the development and evaluation of disruptive technologies. He designed core systems for NASA’s Mars Rover and Mars Phoenix Lander programs and has earned the Six Sigma green belt designation over his years of experience. His knowledge of advanced composite materials, manufacturing processes and thermal system design is a valuable asset for Surna’s industry-leading engineering department going forward.
Surna trades with a market capitalization of about $51 million, according to OTC Markets. By introducing significant technological innovation to the industry, the company has the opportunity to tap into a rapidly growing multi-billion dollar industry in the U.S. and abroad. Meanwhile, its existing and growing revenue base provides investors with nearer term and more certain potential. The pending launch of its reflector technology could also provide a large upcoming catalyst for the stock.
Investors in cannabis growing technologies, including companies like Terra Tech Corp. (OTC: TRTC) and Aerogrow International, Inc. (OTC: AERO), may want to take a closer look at the unique stock. With its modest $51 million market capitalization, the company has a lot of room to grow within an industry that is projected to reach over $10 billion in five years.
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Disclaimer: Except for the historical information presented herein, matters discussed in this article contain forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. Emerging Growth LLC dba TDM Financial, which owns CannabisFN, is not registered with any financial or securities regulatory authority, and does not provide nor claims to provide investment advice or recommendations to readers of this release. Emerging Growth LLC dba TDM Financial, which owns CannabisFN, may from time to time have a position in the securities mentioned herein and will increase or decrease such positions without notice. For making specific investment decisions, readers should seek their own advice and that of their own professional advisers. Emerging Growth LLC dba TDM Financial, which owns CannabisFN, may be compensated for its Services in the form of cash-based and/or equity- based compensation in the companies it writes about, or a combination of the two. For full disclosure please visit: https://www.cannabisfn.com/legal-disclaimer/.
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