medicinal cannabis greenhouse

Australian Medicinal Cannabis cultivation indoors or outdoors debate

Medicinal Cannabis cultivation has been a hotly discussed topic in Australia ever since cultivation was made legal in October 2016. The industry has been buzzing with new ideas, initiatives and investment as well as a renewed focus on an older but crucial topic: the indoor-outdoor cultivation debate. As leading cannabis cultivation facility design architects and engineers, PharmOut are well placed to advise on cannabis facility design options.

As a traditional pharmaceutical architectural, engineering and quality consultancy, PharmOut’s strengths are more complementary to an indoor cultivation option, as it’s closer to the ‘pharmaceutical clean room’ scenario as opposed to the outdoor cultivation options.

However, having worked extensively across multiple industries and countries, we know that picking the best cultivation option will require cultivators to do some in-depth thinking about their unique variables:

  • What is the desired end-product / dosage form?
  • What competitive resources are available?
  • What are the limitations of the current facility / landscape?
  • What are the pros and cons of each cultivation option?
  • And arguably the biggest factor, what is the location of your  medicinal cannabis cultivation site?

Being competitive in an international market

The combination of the massive investment in Medicinal Cannabis cultivation as well as the currently zero market outlet within Australia has led many to eye up the international export market. Because we live in this global village, it is important to ensure that the Australian Medicinal Cannabis cultivation landscape is “designed for success”, and this will require business owners to make careful and strategic investment choices when planning their facilities.

Australia has some of the world’s most expensive energy, real estate and labour costs. A report on “Modelling the cost of Medicinal Cannabis” on the ODC website, estimated labour costs at just under $8m per annum. If you compare the Australian minimum wage at around AUD$18.29/hr to the Canadian minimum wage of AUD$11.55/hr, there is $5m extra in labour costs alone for Australian cultivators to consider. In addition, Australian energy in the form of electrical power, is almost three times the cost of energy supplied in the US. All these costs combined with a saturated international market are factors which will force medicinal cannabis cultivation executives to seriously evaluate their Australian investments. This blog is about how do we design for success, how to build in quality from the outset and how to best utilise (or not!) the most suitable Australian growing conditions.

Out of professional curiosity, we decided to examine the available weather data and see if there was a location in Australia that would provide the ideal conditions for Cannabis.

We assumed the following ‘ideal’ growing conditions:

  • 25 to 27oC (or a more practical range of 20 to 30oC) with a 5oC overnight temperature drop
  • A relative humidity range between at 40 to 50% RH (dependent on strain)
  • 1400ppm Carbon Dioxide (CO2)


Based on these criteria, we extracted and modelled data from 13.2 million weather data points from the Australian Bureau of Metrology and we then set out to find the perfect location in Australia…and couldn’t find it!

Despite humanity’s best efforts at messing up the ecosystem, CO2 is still only sitting around 375ppm.

If we take CO2 out of the equation, we found that the locations closer to the poles favour indoor cultivation, locations closer to the equator favour outdoor cultivation, and environments in-between those conditions will favour greenhouses / glasshouses. This is also reflected in the location of quite a number of cultivation facilities in the west coast of North America – favoured due to the lower humidity.

So which method is best cultivation method?

There are three main options:

1. Outdoor or Broad-acre cultivation:

Broad-acre is known for its shorter seasons and occasionally sub-optimal or inconsistent growth rates. Cultivators have a limited control of the environment, and as Cannabis is seasonal, only 1 crop per year can be produced.

However, when launching, broad-acre cultivation is hands-down the cheapest and fastest way to go. Despite the inevitable increased perimeter security costs and the surrounding regulatory red tape, sunlight is free and there is a lower carbon footprint associated with broad-acre due to the much lower cost of resources.

Given the ODC’s conservative approach, it seemed unlikely that broad-acre cultivation methods would be approved due to security concerns. However, as the industry’s knowledge base has grown and more outdoor case studies have been presented by businesses, the ODC have been increasingly amenable to the cultivation model (as long as the additional risks posed by outdoor sites can be efficiently mitigated.)

2. Greenhouse or ‘igloo’ cultivation

Greenhouse medicinal cannabis cultivation allows for more control over the environment and cultivators can typically grow up to 2 crops per year. If your location or local city council does not permit broad-acre growing, a new state-of-the-art greenhouse armed with light deprivation abilities, supplemental lighting, and heating and cooling abilities that are all controlled through automation will be significantly less expensive than constructing indoor cultivation modules. Greenhouses are great, especially when starting out, as they are a medium-tier option that is less expensive and more straight forward to run than indoor cultivation modules.

However, there is more to efficiently running a greenhouse than rich soil, perfect temperatures, sunshine, water and plants. There are a variety of growth mediums (nutrient-supplemented soil, coco choir, peat, etc.) as well as different light deprivation/supplementation strategies to consider as well.


3. Indoors

cannabis power consumptionIndoor medicinal cannabis cultivation has the highest level of security, gives full control of every critical growth parameter (CGP) and it is possible to grow between 4 to 8 crops per year.

Based on publicly available costs for facilities in California, a medicinal cannabis cultivator in that state spent AUD$40 million on a 35,000 m2 indoor facility. This comes to about $1,100 per m2 and is quadruple the approximate $10 million required to build a greenhouse facility of a similar size. At $1,100 per m2, this would be considered extraordinarily cheap in Australia – our own estimates are between $2,000 to 3,000 per m2 and is highly dependent on the final facility finish and the level of automation present (a key consideration when dealing with high Australian wages).

For an indoor facility, during the vegetative stage our engineers estimated that the lighting alone at an installed capacity of 600 w/m2, at a 4,000m2 scale, at $3,000 per m2, will cost $12 million. However, the rough maths on a facility this size also indicates that you will need 2,400 kW of installed power capacity. In Australia, this power demand at $0.15 per kWh will result in an electricity bill of about $250k per month.

Obviously, facility costs can be highly variable and dependant on multiple factors, e.g. the veg/flow cycles or the availability of alternative more cost-effective lighting technology like LEDs and not HPS.

Our modelling estimates that close to 50% of the light energy will be dissipated in the grow room and the other 50% will be available to use elsewhere. Based on grower old and less efficient data from North America, 4 cannabis plants consume about the same electricity as 29 refrigerators, with 1g of dried bud per mrequiring about 4 kWh of electrical energy or 3.6 megajoules.

medicinal cannabis electricity costs We and most experts in this area acknowledge that in some cases indoor cultivation may still be the most viable option and could even be the best option if wanting to consistently produce the best quality cannabis with defined characteristics.

Obtaining an affordable and secure parcel of land on which to set up an outdoor cultivation or automated greenhouse can also be a lot harder than finding a “renovation ready” building. Based on our experience, to gut and renovate a pre-existing building can take between six to twelve months. As discussed, the incredibly high-power demands of indoor cannabis growing will mean that the renovation job almost always includes an upgrade in the building’s energy infrastructure.

Each of the three cultivation options have their pros and cons; the North American trends however, are indicating that highly automated green houses are the best bet.  

The hidden regulatory costs

While the cost of establishing and maintaining a ODC license is somewhat comparable to the North American regulatory frameworks, the cost of obtaining and maintaining a TGA manufacturing license is not. As the Australian government has decided to treat cannabis like a medicine, manufacturers must consider the additional costs associated with maintaining GMP compliance, such as obtaining a GMP licence, hosting TGA inspectors, establishing a Pharmaceutical Quality System (PQS) and validating equipment, software and services within the facility.

As an example, if an extraction system is used to produce a final finished medicinal cannabis product, for that system, cleaning validation must be performed and the cleaning regimen tested post manufacture to ensure that all product has been removed from product contact surfaces prior to the next run. Computer systems like the PLCs, typically found in extraction systems, must also comply with Annex 11 of the PIC/S code of GMP. This also extends to software such as “seed to sale” HPLC / LIMS software and will significantly ramp up the cost of these systems.

We have already experienced medicinal cannabis cultivators buying “proven” software from Canada and USA, only to have the software rendered unusable due to it not having any ability to be validated as per GMP standards. In other cases, the software has not contained sufficient security controls to comply with the ODC security requirements. Hopefully, vendors will eventually clue on and modify their software so that they are US FDA / CFR Part 11 compliant systems as well as providing the appropriate level of security.

While the cost of obtaining and maintaining GMP compliance is high, we believe that the thoroughness of the regulatory regime will catapult and cement the Australia Medical Grade Cannabis as the potentially the best in the world.

So, the final analysis?

According to North American models, a kilogram of indoor-grown cannabis costs about AUD$1,800 to produce. Product grown in mixed greenhouse, with supplemented light and some light-deprivation, is sometimes getting better prices due to the greater utilisation of natural resources. However, there is upcoming novel LED technology which has the potential to reduce energy consumption by 30%. Given the potential savings, it would be worth investing in researching and optimising this technology.

While the above broad economic factors will drive prospective cultivators into greenhouses if they are located near Byron Bay, for example, there are situations and locations like Melbourne, where indoor could be more appropriate. Greenhouses will most likely be the most commercially viable model, with indoor growing likely to be constrained mostly to smaller scale research facilities which require a greater control over variables.

An additional aspect to consider is that very humid climates combined with outdoor cultivation poses a great risk of mould – a cultivator’s worst nightmare especially if you get powdery mildew during your flowering cycle. With most cultivators preferring a relative humidity in their grow rooms of 40 to 50%, the cost of dehumidifying large greenhouses could rival the electrical energy costs of indoor cultivation.

Before you leap into Medicinal Cannabis cultivation, it is important to take a leaf out of the real estate book and consider the old mantra: location, location, location.

Please note the blog is general in nature and should not be taken as detailed professional advice, PharmOut has a detailed cost spreadsheet for the benefit of our clients.


If you are interested in reading more on medicinal cannabis topics, you might be interested in the following blogs:

Applying for Licences to Manufacture Medicinal Cannabis API

Access to Medicinal Cannabis Clinical Trials under the CTN scheme

Medicinal Cannabis Manufacturing Training Course