A 5-point plan for Virginia’s data centers – Virginia Mercury

None of the sessions at last month’s Virginia Clean Energy Summit (VACES) in Richmond were devoted to data centers, but data centers were what everyone was talking about. Explosive growth in that energy-hungry industry has everyone — utilities, the grid operator, and the industry itself — scrambling to figure out how Virginia will provide enough new power generation and transmission. And, worryingly, no one seems to have an answer. 

Or rather, lots of people have answers, but none of them achieve the trifecta of providing data centers the energy they need while continuing the explosive growth trajectory that state leaders seem to want, and at the same time keeping Virginia’s transition to zero-carbon energy on track. Something has to give. Which will it be?

With no action, the “give” comes from the people of Virginia. Residents will see growth they don’t want, pay for infrastructure that doesn’t serve them, suffer from pollution that is not of their making, and see their tax dollars subsidize an industry that employs almost no one.

The no-action option isn’t a solution

But first, a quick recap. Northern Virginia already has the largest concentration of data centers in the world. As of late 2022, data center electricity demand had grown to 21% of Dominion Energy Virginia’s entire load, and likely an even larger percentage of the load of Northern Virginia Electric Cooperative (NOVEC), which serves much of Data Center Alley.

Worse, the industry is just getting started. Grid operator PJM’s grid forecast projects Dominion’s data center load will quadruple over the next 15 years, while NOVEC’s will rise to ten times what it is today. Other rural electric cooperatives in Virginia told PJM they also expect a huge demand from data centers, a prediction confirmed by news that Amazon Web Services expects to spend $11 billion on data centers in Louisa County, in the territory of Rappahannock Electric Cooperative. 

In its Integrated Resource Plan (IRP) filing in May of this year, Dominion told the State Corporation Commission (SCC) that due to data center demand, it plans to ignore Virginia’s commitment to achieving a zero-carbon economy. Instead of increasing the pace of renewable energy and storage construction, it wants to keep coal plants running past their mandatory retirement dates and even build new gas combustion turbines as well as billions of dollars’ worth of new transmission infrastructure. The result will be higher costs for consumers and massive increases in carbon emissions, violating the carbon-cutting mandate of the Virginia Clean Economy Act. 

Bill Murray, Dominion senior vice president for corporate affairs and communications,, seems to have tried for a more conciliatory tone in talking to Senate Finance Committee members last week about the challenge of meeting data center load. Murray is quoted in the Richmond Times-Dispatch telling members, “We have worked through these challenges before.” Isn’t that reassuring? If only it were true. 

If Dominion’s response has been less than adequate, others have not done better. PJM, already woefully behind on approving new renewable energy generation interconnection requests, blames states for wanting clean energy rather than doing its own job to help the market provide it. A PJM representative told the VACES audience utilities should just keep their fossil fuel plants running until it can work its way through the backlog, hopefully by 2026.

Virginia’s Data Center Coalition doesn’t see energy as its problem to solve, and its members seem strangely content to run on fossil fuels. Others in the industry are trying to do better, though. Whole conferences are devoted to the subject of lowering the carbon footprint of data centers. In addition to a pledge to use renewable energy 24/7, Google has achieved remarkable levels of energy efficiency (for you nerds, they claim an average PUE of 1.1). Google, however, has only a small footprint in Virginia. 

Amazon Web Services, the biggest data center company in Virginia, buys renewable energy but is not striving for the 24/7 standard. AWS’ senior manager for energy and environment public policy, Craig Sundstrom, told a panel at VACES that by 2025, AWS will have offset its use of grid power with purchases of renewable energy on the PJM grid, and he pointed to 16 solar projects the company has in operation or under development in Virginia. That’s a great start, but it’s only a start. With no battery storage in the mix, AWS will still be using grid power from fossil fuels most of the time.

Why are ratepayers footing the bill for Virginia’s data center buildout?

Wishful thinking will not solve this 

So what should data centers do? Or, since most of the industry doesn’t want to do anything, what should Virginia utilities and policymakers do? 

VACES conference attendees had a few suggestions. The nuclear energy true believers were there, touting small modular reactors (SMRs). Gov. Youngkin and many Virginia legislators are fans of nuclear, but the timing was unfortunate. A few weeks after VACES, the first SMR in development — the one that’s supposed to prove how great the technology is — lost its customers due to increasing cost projections. The chances of SMRs ever outcompeting solar paired with storage seems more remote than ever.

Green hydrogen, a vital part of our energy future, has cost and availability problems right now, too. Microgrids powered by hydrogen fuel cells would be a fantastic solution. I’ll set my alarm for 2030 to check on how that’s going. 

Meanwhile, representatives of Washington Gas and Roanoke Gas earnestly tried to sell the VACES audience on the virtues of methane captured from wastewater treatment plants and hog waste cesspools like those at Smithfield Farms’ concentrated animal feeding operations (CAFOs). 

Some of this so-called renewable natural gas (RNG) may be available now, but it is exceedingly hard to imagine there would ever be enough to supply even the back-up generators at Virginia data centers, to say nothing of meeting 21% (and growing!) of Dominion’s total load. North Carolina has incentivized pig waste biogas for many years, but it still makes up only a fraction of a percentage point of that state’s energy supply.

To hear the gas folks tell it, though, RNG is not just carbon-neutral but carbon-negative, achieving this Holy Grail status by capturing and burning methane that would otherwise escape into the air. They assert that mixing a mere 5% of this biogas into ordinary fossil methane will effectively decarbonize the entire pipeline. In other words, we should be glad CAFOs are such an environmental disaster. 

That dog won’t hunt. If gas companies get to claim the virtues of pig waste biogas, they also have to account for its vices, including the greenhouse gas emissions and other pollution associated with methane capture and leakage throughout collection and delivery.

Also, if factory farming is the answer to the needs of data centers, God help us. Maybe the tech industry should move to Iowa. 

A better approach

One of the better ideas coming out of VACES was a simple one: if clean energy can’t come to the load, the load should go to clean energy. Iowa, in fact, is just one of several states that get more than half their electricity from wind and solar. And indeed, some large tech companies are looking at separating their operations between those that are time-critical and need to be next to load centers and those that don’t, with the latter able to take advantage of better climates and greener energy.  

Tech companies don’t necessarily have to look beyond Virginia to take their operations to clean energy. Nothing prevents them from locating in rural counties where they can surround their data centers with fields of solar panels and banks of batteries. For that matter, a large operator like AWS could buy offshore wind, starting with the Kitty Hawk project that is still seeking a customer. 

Many Virginia data center operators, though, will still need to access the PJM market. They should be expected to follow Google and buy renewable energy and storage to meet at least most of their electricity needs on a 24/7, hourly matching basis. Given the PJM bottleneck, they will need a grace period of two or three years. After that: no renewable energy, no tax subsidy.

Building more Virginia data centers requires increased pollution controls

That’s point one of our data center strategy. Point two: data centers that have to source their own renewable energy will be motivated to use less energy, but Virginia can also set an energy efficiency minimum they should meet to qualify for Virginia’s tax subsidies. They need not match Google’s success, but they should come close.  

Point three: Dominion claimed in its IRP that it could not build enough solar itself to meet the soaring data center demand; this was its excuse for keeping expensive coal plants running beyond their planned retirement dates. If Dominion can’t build it, let others do it. The General Assembly should remove the 35% limit on the amount of solar and storage capacity that third-party developers can provide. A little free-market competition never hurt anyone.  

Point four: If the growth of data centers requires utilities to invest more for energy generation and power lines, the data centers should be the ones paying the extra cost, not residential customers. 

Point five: Leaders should not separate the joy they feel in attracting data centers from the pain their constituents feel in living with data centers and transmission lines, breathing pollution from diesel back-up generators and having the quality and quantity of their freshwater resources threatened. Data center developers and revenue-hungry local governments are not the appropriate decision makers for development at this scale. The administration should convene a task force with the job and power to do comprehensive planning for data center siting, development and resource use. 

Adopting these five points will not stop data centers from locating in Virginia, and that isn’t the goal. What it will ensure is that the development is well planned out, fair and equitable to everyone.