Virginia has a data center problem

Pageland Lane, currently running through farms and parks, will be the central artery of the new data center district.
Pageland Lane is currently rural but would be expanded to four lanes as part of the PW Gateway project. Boosters say increased tax revenues will benefit parks and schools.

Actually, Virginia has several data center problems.

One seems like a good problem to have, at least if you are a locality looking to attract business.

Data centers pay a lot of local taxes while requiring little in the way of local services, and the steady buildout has supported thousands of construction jobs across the region. Indeed, so many data center companies have chosen to locate in Northern Virginia that we now host the largest concentration of data centers in the world. No wonder other regions of the commonwealth are angling to bring data centers to their neck of the woods too.

But there’s more to being the data center capital of the world than just raking in cash. To drive through Data Center Alley is to witness suburban sprawl on steroids, with its attendant deforestation, loss of farmland and loss of wildlife habitat. The environmental destruction doesn’t stop at a facility’s property line; a single building covers acres of land, causing massive rainwater runoff problems that can impact streams and drinking water resources miles downstream.

Other problems are unique to the industry. Cooling the servers requires a single data center to consume as much water as a city of 30,000-50,000 people, and giant fans make the surrounding area noisy day and night. The average data center has so many backup diesel generators onsite that it requires a major air source permit from the Department of Environmental Quality. The generators have to be started up regularly to ensure they will work in an outage. Multiply those startups by the total number of data centers in Northern Virginia, and the result is poorer air quality across the region.

Moreover, data centers require astonishing amounts of energy to power their operations and cool their servers. The industry uses over 12% of Dominion Energy Virginia’s total electricity supply, more than any other business category. Electric cooperatives supply more. Industry sources put Virginia’s total data center load at 1,688 megawatts as of 2021 — equivalent to about 1.6 million homes. Feeding ever more of these energy hogs requires utilities to build new electric generation and transmission lines, with costs and impacts borne by all ratepayers.

Many data center operators have pledged to run their operations on renewable energy, but only a few major tech companies have followed through on building solar facilities in Virginia. Indeed, their energy appetite is so great that if all Virginia data centers ran only on solar energy with battery backup, meeting their current demand would require all the solar currently installed in Virginia, Maryland, DC, Pennsylvania, West Virginia and Delaware put together. (For you energy nerds, I’m assuming a 25% capacity factor for solar; that is, meeting 1,688 megawatts of data center load would take 6,752 megawatts of solar.)

That’s not a reason to send data centers somewhere else — unless, of course, we’re talking about data centers that host cryptocurrency mining (and yes, they exist in Virginia, with more on the way). Those data centers we should certainly send elsewhere, preferably to Mars, unless scientists find life there, and in that case to the nearest black hole in outer space. As for the others, we’d just like them to be part of the climate solution rather than adding to our carbon footprint.

Why are data centers so keen to locate in Northern Virginia? Historically the draws were the fiber-optic network in Northern Virginia, proximity to Washington, D.C., relatively low-cost energy and a concerted early effort on the part of Loudoun County to make locating here as easy as possible.

Then there are the state subsidies. Since 2010, Virginia has offered tax incentives to data centers that locate in the commonwealth. The data center sales and use tax exemption is by far Virginia’s largest economic development incentive. It’s also an increasingly expensive one, rising from $30 million in outlays in 2010 to $138 million in 2020. A state audit showed Virginia taxpayers had provided over $830 million to data center operators through 2020; by now the total is certainly over $1 billion.

A 2019 report of the Joint Legislative Audit and Review Commission found that Virginia received back only 72 cents for every dollar of the data center tax incentive while creating very few jobs. That money-losing proposition was judged “moderately successful.”

Thus far, opposition to data centers has tended to be local and focused mainly on land use issues. Preservationists have been at the forefront of opposition to Prince William County’s proposed Digital Gateway, a data center development across more than 2,100 acres in an area known as the “Rural Crescent.” The development would abut parkland and Manassas National Battlefield, leading opponents to call this a new Battle of Manassas. Citizens have sued the board of county supervisors for approving an amendment to the county’s comprehensive plan that allows the data center expansion.

The battle has spilled across the border into Fairfax County, whose leaders worry that stormwater runoff from the development will pollute the county’s main drinking water source, the Occoquan Reservoir.

The divide on data center siting is polarizing, but it isn’t partisan. The Democratic majority on the Prince William board of supervisors approved the Gateway project over opposition from Republican Supervisor Yesli Vega and state Del. Danica Roem, a Democrat. In a scathing op-ed, Roem argues that there’s no such thing as a green data center.

Since data centers provide essential services and have to locate somewhere, the answer isn’t to ban them from the state (crypto-mining operations excepted!). A better approach would be for Virginia to guide development away from overburdened areas to parts of the state that are desperate for new businesses, and to link tax incentives to energy efficiency and the use of renewable energy and reclaimed water.

Right now Virginia is operating on auto-pilot, paying ever more in tax incentives and fueling conflict, sprawl and carbon emissions. That needs to change.

This commentary appeared in the Virginia Mercury on December 9, 2022. Following that publication, I received emails about a data center proposal in Fauquier County with complaints strikingly similar to those in Prince William County. In addition, a reader in Chesapeake wrote that plans for the development of the Frank T. Williams Farm between a wildlife management area and the Great Dismal Swamp have proceeded with minimal public knowledge or input.

On December 11, Senator Chap Petersen sent an email to constituents criticizing the PW Gateway proposal for its impact on the battlefield and stating, “In the 2023 session, I intend to file legislation to both study and set logical limits on the siting of server farms in historically sensitive areas, as well as on the conversion of agricultural land.”

UPDATE: In its Q3 earnings call, Dominion Energy revealed data centers now make up approximately 21% of its Virginia load (see slide 30). Richmond, we have a problem.

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