See below for another superb piece by Ivy Main, this time on how “the data center crisis [in Virginia] is now official” – cross posted with permission from her blog, Power for the People VA. For more on the major JLARC report on data centers in Virginia, also see Highlights/Video: Major New Report on Data Centers in Virginia Finds Economic Benefits, Also Major Challenges, Particularly on Energy Supply (“Data centers are industrial facilities that are largely incompatible with residential uses”).
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It is a truth universally acknowledged, that a politician in possession of elected office must be in want of large economic development projects.
It does not seem to matter that in the case of Virginia, this compulsion is catapulting us into a costly energy crisis that will raise utility bills for residents; that the public shows no love for this industry; and that the benefits to be gained (mostly in the form of construction jobs) will continue only as long as new projects follow one another in perpetuity until the landscape is consumed by concrete and transmission wires.
To the credit of the Joint Legislative Audit and Review Commission (JLARC), however, it has tried to sound the alarm. JLARC’s report, “Data Centers in Virginia,” released December 9, describes the challenges facing the state as a result of the massive, ongoing buildout of this astoundingly resource-intensive industry. Many of JLARC’s conclusions seem way too sanguine to me, especially around risks to regional water supplies and air pollution from diesel generators, and the policy options it offers don’t always hit the mark.
But on the threat to Virginia’s energy supply, JLARC is blunt: Building enough infrastructure to provide electricity for even just half the data centers projected for development across the state will be difficult, requiring far more generating facilities than are under development today.
As for the current policy of allowing completely unconstrained data center growth – indeed, subsidizing it as we do now with tax exemptions to the tune of nearly a billion dollars per year – JLARC notes we are headed for a tripling of the state’s electricity usage over just the next decade and a half. Meeting that much demand, says the report, would be “very difficult to achieve,” even if the state jettisoned the carbon emission limits imposed by the Virginia Clean Economy Act (VCEA).
For those of you unfamiliar with the vocabulary of bureaucrats, “very difficult to achieve” is a term of art that translates roughly as, “This is nuts.”
It might have been better if JLARC had employed the vernacular, because as it is, Virginia’s elected leaders will probably take “very difficult” to be a sort of heroic challenge, like beating the Russians to the moon, when what JLARC means is more like achieving lasting peace in the Middle East.
One problem is cost. The law of supply and demand dictates that a massive increase in energy demand that isn’t matched by an equally massive increase in energy supply will lead to higher prices for all customers. Yet new energy projects cost money, and under traditional ratemaking principles that also means higher rates for everyone. The result is that it will be impossible to protect residents from higher utility bills, unless changes are made to the way costs get allocated.
(Figuring out how to protect residents and other non-data center customers is currently a focus of the State Corporation Commission, which held a technical conference on data centers on December 16th. Judging by what the experts it convened had to say, the SCC has its work cut out for it.)
Even if ordinary residents could be protected, the bigger problem is that increasing the supply of energy to keep up with soaring data center demand will not be easy, fast or cheap. JLARC warns that providing enough low-cost energy requires that gas plants, solar facilities, battery projects and transmission lines all be built at a pace Virginia has never achieved before, along with onshore wind farms that have never found takers here (though that may be changing), offshore wind projects that currently lack a pathway to development, and starting ten years from now, new nuclear plants in the form of small modular reactors (SMRs) that haven’t yet achieved commercial viability.
Moreover, most of that new generation and transmission will have to overcome local opposition. On the gas side, Dominion Energy’s plans for a new plant in Chesterfield County face fierce resistance from the local community, which argues it has been burdened by fossil fuel pollution for too many years already. Why should residents suffer to benefit Big Tech?
Clean energy also struggles at the local level. Industry representatives told members of the Commission on Electric Utility Regulation (CEUR) on December 17 that more than 30 localities have effectively banned utility solar projects within their borders. Rural leaders openly take pride in their prejudice against solar. Yet legislators are squeamish about overriding local siting authority, even when counties that welcome data centers turn down the solar facilities needed to power them.
And of course, generation projects involve willing landowners. When it comes to transmission lines that are forced on property owners through eminent domain – many of which will be needed only to carry power to data centers – the public backlash is typically even greater.
Given so much local resistance to new generation and transmission, the fact that so many legislators nonetheless remain wedded to the data center buildout testifies to the ability of the human mind to compartmentalize.
For legislators who care about climate, JLARC has more bad news: Fully half the new data center growth coming to Virginia is slated to occur in the territories of rural electric cooperatives, which are largely unaffected by VCEA limits. In addition, very large customers of Dominion and APCo have their own VCEA loophole: if they meet certain requirements, they can leave their utility to buy power from competitive service providers. Thus, if Virginia is serious about decarbonization, it will have to tighten, not loosen, the VCEA.
The report comes with some caveats. JLARC used a team of consultants to model approaches to meeting the supply gaps, and a lot of assumptions go into the consultant’s report without a lot of details. The consultant group says it chose its mix of resources with a view to least cost, but it acknowledges that different assumptions would change the results. It may not have accounted for the fact that renewable energy and storage prices continue to drop; meanwhile, fossil gas prices are so volatile that the one certain thing you can say about any price forecast is that it will be wrong. Moreover, it appears the effects of re-entering the Regional Greenhouse Gas Initiative were not modeled; nor were the social costs of carbon, both of which favor zero-emission sources over fossil fuel plants.
Where there are details, some beg to be questioned. Both the consultants and JLARC take for granted that a shortage of generation in Virginia can be made up by importing electricity from other states. An easy way out, sure, but it works only if other states are producing a surplus. Unless tech companies are required to secure their own carbon-free energy supply, there is no way to guarantee imports will be available. Contrary to one of JLARC’s suggestions, then, retail choice should not be curtailed. The better move is to expand shopping options for large customers, so long as the electricity they buy is zero-carbon.
Even more suspect is the idea that, in order to comply with the VCEA, all gas plants will convert to burning green hydrogen in 2045. The report might as well say, “and then a miracle occurs.” A miracle would be more likely.
However unserious, hydrogen as a placeholder for any hoped-for technology that isn’t available today demonstrates the fundamental problem confronting Virginia’s damn-the-torpedoes approach to data centers. A refusal to put constraints on the buildout means taking a leap into the unknown and hoping something will happen to save us from the consequences of our profligacy.
And sure, maybe it will work out. Legislators tend to be optimists, and they are already betting on bright, shiny objects like SMRs, fusion, and anything else not close enough for its costs and drawbacks to be fully evident. (Not that I’m immune, but personally I’m betting on advanced geothermal, which is not just bright and shiny but already here.) And hey, for all we know, artificial intelligence, the technology most culpable for today’s energy crisis, might even produce some unexpected new energy source.
Or it might not. Given that most of the data center buildout will happen in just the next five years, we might need an actual miracle.
On the flip side, maybe new technology will reduce the energy demand of data centers by orders of magnitude. That would be a fantastic outcome from the standpoint of climate, water and energy — though it would end the construction gravy train in Virginia and leave a wasteland of empty concrete warehouses and stranded energy infrastructure.
Either way, the unconstrained buildout of data centers has handed Virginia leaders a problem that is, in the parlance of JLARC, “very difficult” indeed.
A version of this article originally appeared in the Virginia Mercury on December 24, 2024.
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