Are Virginia ratepayers and residents subsidizing the data center industry?

February 2, 2023 12:05 am

A data center in Haymarket, Virginia. (Hugh Kenny)

By Chris Miller

Governor Glenn Youngkin’s Jan. 20 announcement that Amazon Web Services plans to spend $35 billion to establish multiple data center campuses across Virginia was not welcome news for all. Here’s why: it seems that Virginia is chasing an initiative that will require our energy system size to double or triple, with ratepayers footing the bill.  

Data centers are massive users of electricity. A December 2021 Virginia Department of Energy report projects that data centers will drive nearly all future electricity load growth through 2045, while combined electricity demands from every other sector (residential, industrial and non-data center commercial) would stay level or decline. Data centers’ enormous appetite for power would require dramatically increased  power generation and associated infrastructure, such as new transmission lines and electrical substations. Who would pay? Virginia ratepayers, of course.

What sort of numbers are we talking about? In Loudoun County, a proliferation of data centers has led to capacity and reliability issues with the power grid currently supporting its “Data Center Alley.” As introduced, House Bill 2482 and Senate Bill 1541 would effectively label $627 million of emergency transmission upgrades to address those issues as “an ordinary extension or improvement,” removing oversight by the State Corporation Commission for a project that will ultimately be rate-based. And that’s just one cluster; the energy transmission infrastructure cost required for a new round of data center expansion would run in the billions.

A view of the rooftop of a Haymarket, Virginia data center. (Hugh Kenny)

The very last paragraph of the governor’s press release mentions the creation of a “Mega Data Center Incentive Program.” This program would give Amazon “up to a 15-year extension of Data Center Sales and Use tax exemptions on qualifying equipment and enabling software,” and “up to $140 million for site and infrastructure improvements, workforce development, and other project-related costs.” HB 2479 and SB 1522 appear to set up the framework for the program. This money isn’t falling from the sky; it comes in the form of lost tax revenue for municipalities or the state, or as a direct subsidy paid by Virginia taxpayers.

Data centers are a modern reality and can be a valuable source of economic development. But when you take a hard look at the gross costs associated with these facilities, which include not only ratepayer-funded energy expenses but also largely uncompensated impacts to land, water quality and supply, and local residents, we have to pause and ask serious questions. Most importantly, who is benefiting and at what cost to Virginia taxpayers and ratepayers?This is why The Piedmont Environmental Council and a coalition of Virginia organizations are supporting SB 1078 and Senate Joint Resolution 240, which require review of water usage and carbon emissions and a statewide study of the impacts of data center development on Virginia’s ratepayers, environment, economy, energy resources and ability to meet carbon-reduction goals.

Chris Miller is president of the Piedmont Environmental Council in Warrenton.

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