Electricity demand in Virginia is projected to double over the next decade because of the expected growth in data centers, outstripping the generation capacity of existing infrastructure and threatening to raise energy costs for consumers.
A report released this week by the General Assembly’s Joint Legislative Audit and Review Commission stated that unconstrained power demand of about 10,000 gigawatt-hours in 2023 would double by 2033 and increase above 30,000 gigawatt-hours by 2040, “with the data center industry being the main driver.”
Data centers are specialized buildings that house network equipment used to power the internet, cloud computing and artificial intelligence. Growth in those industries is driving the need for more data centers.
The report comes as some states are competing to land big data center projects and, they hope, an accompanying boon in tax revenue and other economic benefits. Other states are weighing the potential pitfalls, which could result in more data center industry regulations.
In Virginia, Gov. Glenn Youngkin (R) has championed the industry. But the Democrat-run legislature may want more development guardrails.
In a statement provided by his office, Youngkin called data centers an economic win for the state, even if it requires more fossil-fueled electricity generation.
“Virginia has a simple choice: embrace all of the above and deliver affordable, reliable, and, yes, increasingly clean baseload power to support future economic growth, while taking advantage of the billions of dollars in capital investment, high-paying jobs, and local and state tax revenues that come from data centers; or bend the knee to a green energy agenda and give away Virginia’s leadership position,” Youngkin said.
“Let’s get serious, embrace common sense, growth, and opportunity, and keep Virginia winning.”
According to the report, the data center industry has contributed 74,000 jobs, $5.5 billion in labor income and $9.1 billion per year in gross domestic product to Virginia’s economy.
Most of the economic benefits derive from the construction phase and are concentrated in northern Virginia, where most of the state’s data centers are located and is the largest data center market in the world.
Sen. Danica Roem (D), who represents the area, raised concerns this year about the industry’s growth, including environmental and other impacts it has on surrounding communities. Her northern Virginia district is home to data centers dotted throughout the region.
Roem introduced a suite of data center-related bills this year, including measures that would blunt the effects on state and national parks, require disclosure of projects’ water and power usage, and require data centers to implement stormwater management. All those bills were held over for the upcoming session.
Read more: Data center growth in Va. spurs burst of legislation
After the report was released, Roem warned of higher energy costs.
“If you are in the greater Richmond area for example, and you say, ‘Well, why do I care about data centers in western Prince William County?’ Because your energy bill is going up because of that,” Roem told WAVY after the report was released.
The demand could add between $14 and $37 to consumer power bills by 2040, the report said. That could be caused by power becoming a more limited resource or consumers getting stuck with the cost of building new power plants for data centers that go offline because of bankruptcy or another unforeseen event.
The report found that the industry pays for all the power it currently uses.
New demand would need to come from more renewables and natural gas, but would have to come online more quickly, the report said. And even trying to meet just half of the unconstrained demand would make it more difficult for the state to hit its greenhouse gas reduction mandates. Under a 2020 law, the state is required to move to 100% zero-carbon-emitting energy by 2050.
Lauren Bridges, who studies data centers at the University of Virginia, said one angle missing from the report is a more cumulative look at the data centers’ effects in the region.
“Every data center that is sited and every new proposal that requires a change of zoning, the environmental impact statements are done on a case by case basis,” Bridges said. “And this is problematic because it doesn’t consider how the cumulative development of a region will have long term impacts.”
Bridges’ comments came on a call Tuesday hosted by the Council of State Governments Midwest on data center water usage.
Josh Levi, president of the Data Center Coalition, the industry trade group, said the report underscored its role in the state’s economy.
“The study validates Virginia’s leadership in attracting and nurturing this dynamic, critical industry over the past 15 years,” Levi said. “The report recognizes that the data center industry continues to make substantial contributions to communities across the Commonwealth – from capital investment and stable, well-paying jobs to state and local taxes that help fund important civic priorities like education, public safety, and transportation.”