Greenpeace protesters at the site of Amazon’s HQ2 in Arlington, Virginia, in 2019 called out the company for failing to make progress towards its commitment to power the cloud with renewable energy. Since then, the company has actually increased its carbon emissions. Photo courtesy of Greenpeace.
When Amazon announced this month that it had achieved 100% renewable energy seven years ahead of schedule, that sounded like really good news for Virginia. Amazon owns more data centers here than anyone else, and data center energy demand is driving Dominion Energy Virginia’s plan to renege on its climate commitments, keep dirty coal plants online and build expensive new gas plants and transmission lines.
Unfortunately, Amazon’s announcement is so full of asterisks it looks like a starry night.
Let’s start with the good news. Amazon’s claim that it has purchased enough renewable energy to “match” its energy use is likely true, though its sustainability report doesn’t reveal essential details like how much energy the company uses. Amazon also says it is the largest corporate purchaser of renewable energy in the world, an impressive achievement.
Some of that renewable energy is in Virginia, so it is reasonable to say it serves the company’s data centers here. A map on Amazon’s website shows the company has invested in 19 solar farms in Virginia, with a capacity that totals around 1,386 MW – about a quarter of all solar installed in Virginiato date. That’s terrific. If every company operating in Virginia did as much, we’d be rolling in solar, figuratively speaking.
So what am I complaining about?
One problem is that the energy appetite of Amazon’s data centers in Virginia far outstrips the output of all of its solar farms here. The other problem is that producing renewable energy in the middle of the day can only very loosely be said to “match” energy used at other times of the day and night. Meeting energy demand on a 24/7 basis is harder, and Amazon isn’t even trying.
Let’s start with the numbers. Because the sun doesn’t shine all the time, a large solar array produces, on average, 22-25% of what it produces on a cloudless day at noon. (That percentage is known as the facility’s capacity factor.) At a 25% capacity factor, Amazon’s 1,386 MW worth of solar panels produce enough electricity to “match” about 347 MW of demand.
Amazon keeps its energy demand in Virginia a secret, but we can be pretty sure its 110 data centers here use way more than that. A 2019 Greenpeace report estimated Amazon’s Virginia data center demand at 1,700 MW in operation or under construction, an amount that would call for 6,800 MW of solar. Amazon rejected Greenpeace’s estimate at the time, but it didn’t supply a better one. More recent estimates suggest Amazon’s energy appetite in Virginia is on its way to 2,700 MW, enough to require the output of around 11,000 MW of solar.
Luckily for us, Virginia is part of PJM, a regional transmission grid that covers all or parts of 13 states plus Washington, D.C. Generation sources located anywhere in the region can serve a Virginia customer, and Amazon’s map shows it has utility solar and wind projects in several PJM states. By my count, these add up to as much as 4,000 MW of additional renewable energy that could be allocated to Virginia data centers, if Amazon had no other operations in those states that it wanted to power. (Which, however, it does.)
Adding together its solar in Virginia and elsewhere in PJM still leaves Amazon short of what it likely needs. So, if the company is correct that it has secured enough renewable energy to match all of its demand, a lot of those facilities must be in other regions or other countries. Yet the climate benefit of Amazon’s solar farms in (for example) Spain, which gets more than 50% of its electricity from renewable energy, is significantly less than the climate benefit of solar in PJM, where the percentage of wind and solar combined still hangs in the single digits.
I will – almost – give Amazon a pass on this point. PJM has been so appallingly slow to approve new generation that Amazon could well have as many projects in the “queue” as online. PJM claims it will catch up in the next year and a half, and when that happens, perhaps Amazon won’t feel the need to obfuscate.
Even if Amazon were “matching” all its energy needs with wind and solar in PJM, though, it’s the second problem that troubles me more. Building solar and wind is cheap; Amazon very likely makes a profit on it. Actually ensuring renewable energy provides all the juice for the company’s operations every hour of every day, on the other hand, would require a heck of a lot of expensive energy storage. And Amazon is not doing that.
Without energy storage, solar delivers electricity only while the sun is shining. The rest of the time, Amazon’s data centers run on whatever resource mix the local utility uses. In both Virginia and PJM’s territory, fossil fuels make up the great majority of the mix. Building more Amazon data centers in Virginia increases the burning of fossil fuels, causing more pollution and raising costs that are borne by the rest of us.
The self-styled climate hero turns out to be a climate parasite, harming people to make itself look good.
Combining renewable energy with storage to achieve true carbon neutrality isn’t prohibitively expensive. Other leading tech companies seem to be making that extra effort, with Google notable for its commitment to meeting its energy demand with renewable energy and storage on a 24/7 basis.
Amazon’s failure to rise to this challenge explains why, in spite of its massive investments in wind and solar, the company’s carbon footprint actually rose by 34% since the launch of its Climate Pledge in 2019, when it set a target of net zero carbon emissions by 2040.
That explains why, a year ago, the Science Based Targets initiative, a U.N.-backed organization that monitors corporate net-zero plans, removed Amazon from a list of companies taking action on climate goals. According to press reports, Amazon failed “to implement its commitment to set a credible target for reducing carbon emissions.”
Among those least impressed with the company’s efforts are its own workers. Last year, Amazon Employees for Climate Justice accused the company of failing in its climate commitments, and the group released its own report this month alleging multiple climate failures, including using “creative accounting” to inflate its achievements.
If Virginia is serious about meeting the climate challenge, we can’t blindly accept rosy claims from corporations whose central goal is not sustainability, but growth. Data centers whose energy demand isn’t met on a 24/7 basis from zero-carbon sources located on the same grid are not part of the climate solution, they are part of the problem. And currently, Amazon’s data centers are making the problem worse.
This article was first published in the Virginia Mercury on July 24, 2024.
A data center in Ashburn, Virginia. Photo by Hugh Kenny, Piedmont Environmental Council.
Somehow, we were not prepared for this. Artificial intelligence was in development for decades, during which time we fantasized about all the wonderful things it was going to do for us. And then the bots launched almost fully formed like Athena springing from the forehead of Zeus with her sword in hand, and only then did we have our epiphany: Oh man, this is not going to go well.
What happened to the AI utopia? We were expecting self-driving cars that would let us drink too much on nights out while eliminating highway fatalities. We anticipated the seamless integration of all our devices and appliances, maybe even without cords! We imagined an unlocking of efficiencies at home and at work; medical breakthroughs; scientific innovation on steroids. We’d have three-day workweeks and go hiking on the weekends while the robots cooked and cleaned.
Maybe these things are still there in our future, along with world peace, but so far what we’ve got is a new way for kids to cheat on homework, a lot of derivative art, pernicious deepfakes and raging arguments over intellectual property theft. Oh, and an unprecedented increase in the demand for electricity that threatens to overwhelm the grid and make it impossible for us to stop burning fossil fuels before global warming destabilizes societies worldwide.
The wonder is why we thought this would go well. Shouldn’t we have known ourselves better?
In my view, the biggest problem with AI is that either humans are in charge, or the robots are. If it’s the robots, there is a good chance they will decide to kill us all, and we won’t see it coming. So we need to root for the humans, who could use the powerful new tools of AI to address hunger and climate change but so far mostly use it for financial fraud, child pornography and adding to the absurd percentage of the internet devoted to cat memes.
And instead of helping to lower CO2 emissions, right now the effect of AI is to increase the burning of fossil fuels. U.S. electricity consumption had flatlined after the mid-2000s, but AI is pushing it up again, and sharply. Data centers, where AI “lives,” could consume as much as 9% of U.S. electricity generation by 2030, double that of today.
We have a close-up view of this in Virginia, the data center capital of the world. In 2022, when I first tried to quantify Virginia’s data center problem, industry sources put the state’s data center demand at 1,688 megawatts (MW) — equivalent to about 1.6 million homes. With the advent of AI and its enormous appetite for power, the industry added 4,000 MW of new data centers in 2023. By the end of last year, data centers commanded fully 24%of the total electricity generated by Dominion Energy Virginia, the state’s largest utility. Over the next 15 years, Virginia’s data center demand is expected to quadruple.
Citing the need to supply data centers with power, Dominion did an about-face on its plan to achieve net zero carbon emissions by 2050. It now proposes to keep coal plants running past their previous retirement dates, and to build new gas-powered generation.
The problem is not confined to Virginia. Across the country, utilities are struggling to meet AI’s increased energy demand, and looking to fossil fuels to fill the gap.
And while tech companies talk a good game about meeting their power demand sustainably, the evidence says otherwise. Tech companies conspicuously did not push back on Dominion Energy’s plan, and their own efforts fall woefully short. Even Google, which has taken its carbon-cutting obligations more seriously than most companies, just reported a 13% rise in its greenhouse gas emissions in 2023, thanks to its investments in AI and data centers.
Apparently, Google and its competitors in the race to dominate AI think meeting climate goals is like getting a loan from a bank; you emit more today, grow your business and use the profits to clear the debt by emitting a lot less tomorrow.
But Mother Earth is not a bank. She is a loan shark, and she has started breaking fingers.
If we can’t rely on the inventors of AI to restrain their energy appetites, we have to turn to our politicians (sigh). Our leaders have to make and enforce limits on the growth of AI commensurate with the world’s ability to provide the resources without baking the planet. Admittedly, mustering that kind of willpower is hard to do in a country that has elevated corporations to personhood and defines the First Amendment to include both spreading lies and spending money to influence elections.
And that gets us to the second-biggest concern I have about AI, but the one that might upend society soonest: the unleashing of deepfakes in this fall’s elections, and the threat that the reins of government will go not to those most dedicated to tackling hard problems, but to those who prove themselves the biggest scoundrels.
The American Bar Association (ABA) defines deepfakes as “hoax images, sounds and videos that convincingly depict people saying or doing things that they did not actually say or do.” Noting that they have already been used in election campaigns in the U.S. and abroad, the ABA is promoting model state legislation to criminalize the creation of malicious deepfakes. Meanwhile, tech companies including Google and Meta have adopted advertising policies to require disclosures of altered content.
Both approaches are good as far as they go; websites should police content, and states should act swiftly to outlaw the deepfakes (though the ABA lists very few that have done so yet). But in a high-stakes situation like an election, punishing violators after the fact – if you can catch them at all – is very much a case of closing the barn door after the horses are out. Once voters have been exposed to “evidence” of a candidate’s unfitness for office, especially when media coverage has primed them to believe the lies, the damage is done.
Many voters, especially younger ones, are savvy enough to be wary of campaign-related materials generally, and of unattributed images that float around the internet in particular. But older people who came of age in the pre-internet-memes era are vulnerable to believing what they see and hear, and a lot of us won’t put ourselves to the trouble of questioning what feels true. A deepfake only has to fool some of the people some of the time to alter the results of an election.
But maybe I’m being needlessly alarmist about the dangers of AI, even if I have a lot of company. So I did the obvious thing: I asked a bot if AI would save humanity or kill us all.
ChatGPT responded with a list of pros and cons of AI, including the familiar benefits and concerns that have spawned a thousand op-eds. You can try this at home, so I won’t reiterate them here. But I will note the curious fact that the bot didn’t mention either carbon emissions or election-altering deepfakes.
Maybe that’s an oversight, or maybe it means my fears are unwarranted. But maybe it shows something even scarier than AI itself: It’s AI pretending it isn’t trying to take over.
We urgently need action from U.S. and corporate leaders. Stiff new taxes on data center energy use would lead to greater efficiencies and nudge companies to price data storage and AI use appropriately. New laws should put the onus on internet platforms to stop deepfakes before they can spread. Tech companies should prioritize what is good for human beings over what is good for corporate profit. If they can’t ensure AI is used only for good, they should pull the plug until they can.
If all this doesn’t happen, and soon – well, let’s just hope the robots are kind.
This article first appeared in the Virginia Mercury on July 11, 2024.
If you’d like to hear a deeper discussion about the climate challenge posed by data centers and AI, I’ll be addressing this topic tonight at a meeting of the IEEE Society on Social Implications of Technology (SSIT) Chapter of Northern Virginia/Washington/Baltimore in Oakton, Virginia, which you can also attend remotely. The presentation will be recorded.. https://events.vtools.ieee.org/m/424609
Following the General Assembly’s failure either to rein in the explosive growth of power-hungry data centers or to remove obstacles to increasing the supply of renewable energy in Virginia, a lot of people are wondering where we go from here.
Dominion Energy Virginia’s answer, as described in its 2023 Integrated Resource Plan (IRP), is “build more fossil fuels.” The utility is pushing forward plans to build new methane gas generating units in Chesterfield. Dominion argues that although its IRP calls for dramatically increased carbon emissions, it sort of complies with the Virginia Clean Economy Act anyway because the VCEA has an escape clause when reliability is at risk.
Dominion does not acknowledge that its own actions contribute to the problem. To be fair, though, it’s a huge problem, and even if our utilities were on board with the VCEA’s carbon-cutting agenda, we would need stronger legislative policy than we have now. Rejoining the Regional Greenhouse Gas Initiative is an important priority that Democrats are rightly pursuing, but the need for action goes much further.
Sen. Dave Marsden, D-Fairfax, convened meetings the week before last to hear from utilities, industry members, environmental groups and others to get suggestions on ways to reform the VCEA. The interest groups met separately, and members of one group were not allowed to attend other group sessions to hear what those stakeholders had to say. The meetings were closed-door and confidential, with the express purpose of preventing a nosy public from learning anything through Freedom of Information Act requests.
That secrecy makes me queasy, so I declined the invitation to attend the environmentalists’ session. I’d have cheerfully jettisoned my scruples, though, if I could have been in the utility session to hear what Dominion’s lobbyists were whispering in the senator’s ear. Alas, that was not on offer.
But Marsden is asking the right questions, and of course, I always have answers, even when no one is asking. In my view, Virginia can stay on track to carbon neutrality by adopting four basic principles: data centers must pay their own way, both literally and carbon-wise; solar must be easy to build and interconnect; utilities must not build new fossil generation for “reliability” before exhausting non-carbon solutions; and efficient buildings must be added to the strategy.
Let’s start with the elephant outgrowing the room.
Data centers are sucking up all the energy
Without action, data centers will soon overtake residential customers to become Dominion’s largest category of customer. Already, they are driving the utility’s decision-making, as we saw from Dominion’s IRP. This year, the General Assembly deferred action to address the energy crisis until it sees the results of a study being undertaken by the Joint Legislative Audit and Review Commission (JLARC).
It now appears that study won’t be published before the 2025 session convenes, and in fact there does not appear to be a deadline of any kind. Yet we already know enough about data center energy demand and its consequences for everyone else that legislators will be derelict in their duty if they put off all action until 2026.
The General Assembly must choose from three options if it still cares about the energy transition: stop the growth of the data center industry in Virginia, put the onus on data centers to source their own clean energy from the grid, or dramatically increase renewable energy generation and power line construction.
Lawmakers show no desire to stop all data center growth, but as I’ve urged before, they can and should establish a joint state-local task force to choose appropriate sites for growth based on energy and transmission availability, water resource adequacy and good-neighbor factors, like distance from residential communities and parkland.
Legislators should also require data centers to meet industry-best standards for energy efficiency, use alternatives to diesel generators for backup power and source carbon-free energy from facilities located on the grid that serves Virginia. They could buy this power either on their own or through a specially-designed utility tariff, as long as it meets all of their needs on a 24/7, hourly basis. In no case should other customers see higher electricity bills for infrastructure that’s only needed because of data centers.
These measures will take time to put in place, yet data center development is proceeding apace while the General Assembly takes its nap. There is no avoiding Virginia’s need for a lot more carbon-free generation, pretty much right away. A couple of small modular nuclear reactors ten years from now aren’t a solution.
Don’t expect climate leadership from Dominion
Dominion’s fossil-heavy IRP marked a sharp break away from the climate report that the company released just months before, which projected solar dominating the grid by 2040. Whether the IRP should be dismissed as political pandering to a conservative governor, or taken in earnest to mean the utility has thrown in the towel on renewable energy, is something of a Rorschach test for Virginia leaders.
When Dominion releases its 2024 IRP this fall, we may get more clarity about what the company really thinks. More likely, we will still be left guessing. Dominion has a long history of playing to both sides to get what it wants, and what it wants is profit.
There’s nothing wrong with a company making a profit, of course, as long as the company isn’t also allowed to make the rules it plays by. Asking Dominion’s lobbyists to help make energy policy is like recruiting burglars for a task force on crime prevention.
Make it easier to build solar
While Virginia counties vie with each other to attract data centers, some are notably less keen on solar farms. Sprawling developments of windowless warehouses that suck power? Yes, they say. Grassy fields lined with rows of solar panels that produce power? No. Such is the horror with which some people view solar that localities have adopted moratoriums, acreage caps and other limits designed to keep projects at bay. The result is that an already-slow process for siting solar projects is getting even slower, more unpredictable and more expensive.
Lawmakers rejected legislation this year that would have allowed the State Corporation Commission to overrule local permit denials. Yet it seems doubtful whether, in a Dillon Rule state like ours, local governments actually have the authority to enact blanket prohibitions and caps on specific kinds of land use. Legislators may want to ask the attorney general to clarify this point rather than waiting for landowners to challenge in court a locality’s refusal to let them put solar panels on their property.
If the AG (or a court) rules these barriers illegal, localities would have to go back to evaluating the merits of project applications on a case-by-case basis — hardly a bad result. But it would be wiser and more orderly to pass legislation spelling out under what circumstances a local government may reject a solar project, and what the landowner’s recourse should be.
New gas plants are the wrong solution for reliability
Though Dominion’s 2023 IRP didn’t win approval from the SCC, Dominion is going ahead with plans to build new methane gas combustion turbines in Chesterfield. Given that these “peaker” plants generate dirty power at a high price, Dominion should not be permitted to build gas combustion turbines if other alternatives are available.
Which they are. Demand-response programs, advanced grid technologies and batteries charged by renewable energy are superior to gas peakers for reasons of cost, air quality and climate impact.
Dominion is building some large batteries and testing long-duration battery storage technologies (and of course, Virginia already has the largest pumped storage facility in the world), but our utilities have not even begun to tap the potential of batteries in homes and businesses. Subsidizing the purchase of batteries by homeowners and businesses in exchange for the ability to draw on the batteries for peaking power, as some utilities do, would also build resilience into the grid and address power outages more cheaply than burying lines.
Imagine: If data centers had installed batteries instead of the 11 gigawatts of diesel generators at Loudoun and Fairfax County data centers, Virginia would already have more battery storage capacity than any country in the world.
Let everyone build solar
The VCEA calls for 35% of its solar target to be satisfied by third-party developers. The purpose of this set-aside is two-fold: to attract more private capital, and to use competition to keep a lid on prices. Unfortunately, the SCC accepted Dominion’s argument that 35% should be read as a ceiling as well as a floor, to the detriment of ratepayers and solar developers. With Dominion now reneging on its solar commitments, it’s more important than ever that private developers be allowed to step in. One bill in the 2024 session would have corrected this problem by explicitly making 35% the minimum. The General Assembly should adopt that measure.
Fix interconnection
Possibly the most inexplicable failure of the General Assembly this year was failing to pass legislation to resolve the dispute between Dominion and commercial customers over interconnection requirements. The onerous requirements that Dominion adopted in December of 2022 — imposed even in the face of a contrary SCC ruling — have wreaked havoc on plans by local governments to put solar on public buildings and schools. That is fine with Dominion; though the goal of the new requirements was to acquire upgraded distribution infrastructure at no cost to itself, its monopolistic lizard brain is equally satisfied with the result of shutting down competition from small solar companies.
Legislators should not accept this result, though. The General Assembly adopted net metering years ago because encouraging residents and businesses to go solar is good for the economy and makes communities more resilient. Support for distributed renewable energy is even written into the Virginia Code as official policy.
And distributed solar is hugely popular. Indeed, the very people who oppose utility-scale solar projects almost inevitably argue that society should maximize rooftop solar instead. In this they are at least half right: If we are really going to meet the energy challenge ahead of us, the very least we can do is milk every kilowatt-hour from sunshine falling on rooftops.
Customers have always paid to interconnect their solar to the utility’s grid. The dispute between Dominion and its customers is about whether Dominion can insist they pay the entire cost of expensive new fiber-optic wire and other cool technology that could make the distribution grid better for everyone, but which any one customer can’t afford. These upgrades could enable not just more solar but also electric vehicle charging in our communities, vehicle-to-grid technology and programs allowing utilities to make use of customers’ battery storage. But if the technology really is that valuable (a determination that should be made by the SCC, not Dominion), then getting it shouldn’t depend on how deep a customer’s pocket is — especially when that customer is a local government and, therefore, effectively, the Virginia taxpayer.
This year’s interconnection bill would have allowed a utility to recover the costs of these grid upgrades from ratepayers, with SCC oversight. Even Dominion would have been better off with the bill, something it would have recognized if its lizard brain weren’t in charge at the time. The General Assembly should pass the bill.
An untapped three gigawatts of energy are waiting off our coast
Dominion’s 2,600 megawatt Virginia offshore wind project is due to begin construction this year, but it is not the only game in town. The Kitty Hawk offshore wind area situated off North Carolina can deliver up to 3,500 megawatts of energy through a cable that will come ashore at Virginia Beach. All that is holding up the project is the lack of a customer. Offshore wind is more expensive than solar, but we have a lot of power-hungry data centers who could pay a clean energy tariff that would include Kitty Hawk wind.
Maximize efficiency in buildings
Possibly the best piece of energy legislation to pass this year was the bill that directs local governments and schools to build to higher efficiency standards and incorporate renewable energy, as appropriate. The language could have been even stronger, but as it is, it will deliver significant cost savings for taxpayers.
In fact, local governments will now build to better standards than most homeowners get for themselves when they buy a house. That’s because Virginia’s residential building code is pathetically behind the times when it comes to energy efficiency. Home buyers and renters would save more than enough money on utility bills to cover the upfront cost of better housing construction, but builders won’t voluntarily meet higher standards because it reduces profits. That should not be acceptable.
Legislation passed in 2021 directed the Board of Housing and Community Development to consider amendments that would strengthen the building code. BHCD, which is dominated by builder and real estate interests, simply ignored the law. The matter is now in litigation (and the governor is trying to weaken the code even further), but the General Assembly could resolve the matter by directing BHCD to adopt efficiency measures at least as strong as the national standards set by the International Building Code Council (itself under fire for allowing builder interests to weaken efficiency standards), and to allow local governments to adopt stronger “stretch codes” to help residents save even more money and energy.
Going further, new and renovated buildings should be required to use electricity in place of methane gas, oil or propane for heating, cooling and appliances wherever practicable. Though building electrification increases electricity consumption, electricity is a more efficient technology than burning fossil fuels in the home, so it contributes to lower energy costs for residents and a smaller carbon footprint for the state overall.
It’s a shame the General Assembly settled for simply not going backwards this year, but it is a good sign that Marsden and others are not waiting for next year to consider ways to get us back on the carbon-cutting wagon. With the climate clock ticking, we have no more time to lose.
A version of this article appeared in the Virginia Mercury on April 29, 2024.
Data centers increasingly dot the landscape of Northern Virginia, like this one sandwiched between a housing community and the W&OD bike path in Ashburn. Photo by Hugh Kenny, Piedmont Environmental Council.
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.
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.
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.
This article appeared in the Virginia Mercury on November 21, 2023.
In my last column I took Dominion’s Integrated Resource Plan (semi-) seriously, giving the utility the benefit of the doubt in its projections for data center growth and the alleged need for more fossil fuels to keep up with the power demands of that ravenous industry. But as I also noted, Dominion doesn’t deserve to be taken seriously with this document.
Under Virginia law, an Integrated Resource Plan (IRP) is supposed to explain how the utility expects to meet demand reliably and at low cost within the constraints of the law. In this IRP, however, Dominion asked a different question: how to make Gov. Glenn Youngkin happy by keeping fossil fuels dominant regardless of both law and cost.
Coming up with a favorable answer required Dominion to ignore the Virginia Clean Economy Act (VCEA), create arbitrary limits on solar deployment, use wishful thinking instead of facts and, for good measure, do basic math wrong. They also assume the Youngkin administration will succeed in pulling Virginia out of the carbon-cutting Regional Greenhouse Gas Initiative (RGGI), a move that is being challenged in court. This makes Dominion’s IRP, with its plan to double carbon emissions, a sort of evil twin to a plan from any RGGI state.
Sure enough, the governor loves it. Elsewhere, however, this evil twin found a cold reception. Experts retained by environmental, consumer and industry groups all agree that this IRP should be chucked in the trash bin and Dominion told to start over.
It’s worth taking a look at the testimony from these groups to understand where Dominion went so badly wrong, and what a better plan might look like.
It’s all about the data centers
Northern Virginia data centers are the driving force behind Dominion’s plans to burn more coal and gas, but there is some disagreement whether their growth will be absolutely off-the-charts crazy, or merely eye-poppingly huge. Dominion’s IRP projects the data center industry’s power use in its territory will quadruple over the next 15 years, rising from 2,767 megawatts (MW) in 2022 to more than 11,000 MW in 2038. At that point it would represent close to 40% of Dominion’s load.
Experts testifying in the IRP case believe data center demand won’t reach the dizzying heights Dominion projects. They question whether Virginia communities will accept so much new data center development, given the pushback already evident in localities like Prince William and Fauquier Counties. Their thinking is essentially that if things can’t go on this way, they probably won’t.
They also suggest that some of the demand Dominion expects may also be reflected in the plans of other utilities serving Northern Virginia’s Data Center Alley, leading to double-counting. A load forecast published by grid operator PJM shows that Northern Virginia Electric Cooperative (NOVEC) projects its data center demand to rise from about 400 MW in 2022 to 4,000 by 2028 and 8,000 by 2034. Two other cooperatives project a combined 3,000 MW of data center development in the same time period.
Aside from data centers, demand for electricity in Dominion territory is flat or declining over the next fifteen years; presumably this is due to the increased efficiency of homes and businesses offsetting the increased demand from electric vehicles and building electrification.
If you were already experiencing vertigo over Dominion’s data center numbers, and you are now hearing for the first time that Dominion’s numbers represent only half of the total projected data center load coming to Virginia, maybe you won’t find it all that cheering that some of that added demand could be illusory. Still, it is a reasonable point. If you reduce demand by a few thousand megawatts here and there, pretty soon you might not “need” a new gas plant.
As an aside, one Virginia utility stands out for apparently not expecting much in the way of new data centers in its territory. Appalachian Power, which serves customers in Southwest Virginia, West Virginia and Tennessee, has experienced declining demand for years, and rural Virginia leaders would dearly love to see data centers come there. Yet the PJM forecast shows Appalachian Power’s parent company, American Electric Power (AEP), told grid operators it expected only about another 200 MW on top of the 500 MW of data center load it serves across its entire 11-state territory. AEP seems to regard this as quite a lot, which, when compared with what is happening in Northern Virginia, seems rather sweet.
I can’t help but wonder how Gov. Youngkin managed to make a deal with Amazon to bring $35 billion worth of new data centers to Virginia without securing a guarantee that many of the facilities would be located in a part of the state that actually has surplus energy capacity and desperately needs new economic development. Southwest Virginia voters may have put Youngkin in office; you’d think he’d be looking out for them.
Instead of real investment today, Youngkin promises the area a little nuclear plant a decade from now, when and if small modular reactors (SMRs) prove viable. Local leaders must be muttering, “Gee, thanks.”
And this leads to another point raised by several of the experts in the IRP case: All of the load growth Dominion projects is due to a single industry in Northern Virginia; elsewhere, demand is decreasing. Yet, instead of crafting a solution specific to the industry and region experiencing runaway growth, Dominion proposes to build a fossil fuel plant 140 miles away in Chesterfield and a nuclear plant 300 miles away in another utility’s territory.
Gregory Abbott, a former SCC Deputy Director, offers a particularly withering assessment of the IRP in his testimony on behalf of environmental advocacy group Appalachian Voices. Dominion’s computer model, he says, “is proposing supply-side solutions that are not focused on solving the actual problem, are likely unnecessary, and driving costs higher than they should be.”
Although Dominion insists this IRP represents just a “snapshot in time,” Abbott says that’s misleading: The IRP “sets the stage for multi-billion-dollar investments that Dominion’s customers will pay for decades to come. If a future snapshot in time changes, based on new public policy goals or market dynamics, ratepayers are stuck with paying for these sunk costs.”
Garbage in, garbage out
Abbott and others also note that unlike factories or other high consumers of energy, data center operators can shift some functions to other data centers elsewhere for short periods of time. Dominion could save money and reduce the need for new investments by capitalizing on this capability to develop demand-response programs tailored specifically to this industry.
Instead, Dominion treated the surge in demand as if it were statewide and spread across all its customers; then it used a computer model to figure out how to meet the soaring demand.
An expert for the Sierra Club, Devi Glick of Synapse Energy Economics, noted several problems with Dominion’s approach. Among them: the company told its computer model that it couldn’t select energy efficiency as a resource; it had to include gas combustion turbines in 2028; it had to adhere to artificial limits on solar, wind and battery storage; and it had to assume prices for solar that were “substantially higher than industry projections.” Dominion also did not instruct the model to account for proposed (and since finalized) new federal pollution limits that will raise the cost of burning fossil fuels, and miscalculated — by a billion dollars — the penalties associated with failure to meet the VCEA’s renewable energy requirements.
As they say, garbage in, garbage out. The model did what it was told, and produced plans that limited solar and battery storage, called for new gas combustion turbines and/or SMRs, and kept uneconomic coal plants running past their previously-planned retirement dates. Accordingly, none of the modeled scenarios complied with Virginia law and all would be unnecessarily expensive for customers.
Synapse ran its own computer model that kept most of Dominion’s load and cost assumptions but corrected for the company’s errors and artificial constraints. The results, not surprisingly, show that building more solar and storage and retiring coal plants earlier than Dominion wants to will lower carbon emissions and “reduce costs for Dominion’s ratepayers by between $4.1 and $9.0 billion over the 25-year study period.”
When Synapse then tweaked the model to reflect the new federal pollution rules and prices for solar and battery storage in line with industry projections, the results saw solar and battery investments soaring, while the “need” for firm capacity such as a new gas plant disappeared altogether during the planning period.
Clean energy, vindicated
So finally, we begin to see a path forward founded on real data and not constrained by political expediency. With none of its plans meeting the basic requirements of Virginia law, Dominion should be ordered to go back to the drawing board. The company should reexamine its data center load projections and design a demand-response program tailored to that industry. Then it should re-run its computer model with energy efficiency allowed as a resource, with no artificial constraints on battery storage and renewable energy,with federal and state compliance costs associated with fossil fuels fully included and with cost estimates for solar and storage consistent with industry norms.
The General Assembly has a role to play, too, in ensuring the data center industry does not shift costs onto other customers and cause Virginia to fall short of its carbon reduction goals. Data centers should be required to meet energy efficiency targets and to secure an increasing percentage of renewable energy on their own as a condition of obtaining generous state tax subsidies. Likewise, the State Corporation Commission should be required to ensure that data centers pay for the transmission upgrades they need. Finally, the General Assembly should pass the data center study bill adopted by the Senate this year before being killed in the House.
Finally, it’s clear that the computer models will select as much low-cost solar as they are allowed to, so the General Assembly should make it easier to build solar projects at competitive rates. They can do this by further opening the market to third-party developers, who are currently constrained by an interpretation of the VCEA that caps their share of the solar Dominion procures at 35%.
The SCC will hold a hearing on the IRP beginning September 18.
An earlier version of this article appeared in the Virginia Mercury on September 5, 2023.
Virginia’s embrace of the data center industry produced new fallout this spring when Dominion Energy Virginia released its latest Integrated Resource Plan (IRP). With data center growth the “key driver,” Dominion projects a massive increase in the demand for electricity. As a result, the utility claims the state-mandated transition to clean energy is now impossible to achieve.
Jettisoning its commitment to the Virginia Clean Economy Act (VCEA), Dominion proposes to keep running uneconomic coal and biomass plants that were previously slated for closure, build a new fossil gas plant and pay penalties instead of meeting state renewable energy targets, all of which mean higher costs for customers.
As I said at the time, this IRP is primarily a political document aimed at currying favor with a gas-loving governor. It is not a serious plan. For example, a Sierra Club filing with the State Corporation Commission describes how Dominion put artificial constraints into its computer modeling (including limits on new solar) to ensure the plan came out fossil-friendly. Moreover, Dominion’s demand projections are inflated, according to the clean energy industry group Advanced Energy United.
But for the sake of discussion, let’s take the IRP at face value. And in that case, I have some questions. How did Dominion let itself get blindsided by the data center growth spurt? Why are the rest of us expected to pay for infrastructure that’s only needed for data centers? Does the Governor understand that his deal to bring another $35 billion worth of new Amazon data centers to Virginia is driving up energy rates for everyone else?
Oh, and while I’m at it, are tech company commitments to sourcing renewable energy just a pack of lies?
Virginia’s data center problem is well known. Northern Virginia has the largest concentration of data centers in the world, by far. Data centers are Dominion’s single largest category of commercial power users, already consuming more than 21% of total electricity supply and slated to hit 50% by 2038. In addition to the new generation that will be required, data centers need grid upgrades including new transmission lines, transformers and breakers, with the costs spread to all ratepayers.
Residents are not happy. Controversy around data centers’ diesel generators, their water use, noise and visual impacts have spread outward from Loudoun County into Prince William, Fauquier, and even other parts of Virginia as massive new developments are proposed.
Data center developers don’t build without assurance they will have access to the huge amount of electricity they need for their operations, so they have to start discussions with their utility early. Yet in July of 2022, Dominion stunned the data center industry by warning it would not be able to meet new demand in Loudoun County until 2025 or 2026. The utility said, however, that the problem was not generating capacity, but transmission. So, what gives?
Not that it would be better if Dominion anticipated the oncoming tsunami but kept it secret until this spring. You have to wonder whether the General Assembly would have approved hundreds of millions of dollars in grants and tax subsidies for new Amazon data centers in February if legislators understood the effect would be to upend the VCEA and drive up energy costs for residents.
Some Republicans are no doubt pleased that Dominion’s IRP undermines the VCEA, but they shouldn’t be. Dominion proposes keeping coal plants open not for economic reasons, but in spite of them. These plants were slated for closure in previous IRPs because they were costing ratepayers too much money. Now Dominion says it needs more generating capacity and can’t (or rather, won’t) build enough low-cost solar to keep up with new data center demand.
Dominion also proposes to build a new methane gas combustion “peaker” plant that wasn’t in its last IRP, and again the company points to data center growth as the reason. Peaker plants are an expensive way to generate power; on average, the cost of energy from gas combustion is about double that of a solar/storage combination, or even triple once you factor in federal clean energy incentives.
Keeping the fossil fuel party going instead of embracing more solar isn’t the only way this IRP drives rates higher for customers. Limiting its solar investments means Dominion expects to miss the VCEA’s renewable energy percentage targets by a mile. The shortfall would subject Dominion to significant penalties. The kicker is, Dominion can pass the cost of those penalties on to ratepayers, too.
Regardless of your political persuasion, then, this IRP is bad news for Virginia consumers.
It’s also concerning that the driver of all these higher costs and carbon emissions is the high-tech industry that is so eager to be seen as a leader in sustainability. If these tech companies were meeting their power needs with renewable energy, Dominion wouldn’t be able to claim a “need” to keep its old coal plants belching away.
Amazon, the number one beneficiary of state data center largesse, says it is the leading corporate purchaser of renewable energy globally. Its website claims the company is “on a path to powering our operations with 100% renewable energy by 2025.” A map shows it has developed around 16 solar projects in Virginia, adding up to over 1,100 megawatts. That’s great, but the company’s Virginia data centers are such energy hogs that they would need many times as much solar, plus a huge amount of battery storage to meet their 24/7 demand. And of course, Amazon’s demand will skyrocket with that next $35 billion in new data centers.
That same map, by the way, shows that Amazon has on-site solar at warehouses and Whole Foods stores all over the Northeast, but none in Virginia. Northeastern states have higher commercial power rates than Virginia does, so on-site solar means bigger bill savings in those states. One cannot help but suspect that Amazon’s commitment to renewable energy is really just a commitment to cheap energy.
The Data Center Coalition’s filing in the IRP case does nothing to reassure us otherwise. Instead of chiding Dominion for reneging on its clean energy commitments, the Coalition’s Josh Levi essentially argues data centers are so important it doesn’t matter.
I have no beef with data centers as a general proposition. They are an integral component of today’s economy, and the developments that now drive their explosive growth — machine learning and artificial intelligence — will also help us achieve a zero-carbon future.
I just think data centers should try a little harder to be part of the solution instead of part of the problem.
This article was first published in the Virginia Mercury on August 16, 2023.
For followers of Virginia energy policy, 2023 will be remembered as the year Dominion Energy lost its stranglehold on the General Assembly. The utility’s all-out campaign to boost its return on equity earned it little more than crumbs. By contrast, a bill to return authority over rates to the State Corporation Commission garnered overwhelming support.
Another surprise loser was the nuclear industry. Gov. Youngkin and boosters of small modular reactors (SMRs) expected a lot more love, and incentives, than legislators proved willing to dole out this early in the technology’s development.
Less noticed was the rise to political power of one of Dominion’s largest customers, Amazon Web Services. Many legislators may still not have caught on, but the corps of lobbyists who haunt the hallways of the General Assembly building know a 500-pound gorilla when they see one. As one lobbyist put it: “Amazon is the new Dominion.”
These are the standout takeaways from a legislative session in which, otherwise, few significant energy bills emerged from the scrum. Senate Democrats ably protected the energy transition framework established in 2020 and 2021, but modest efforts to accelerate the transition mostly failed. Of the roughly 60 bills I followed this session, only a handful made it to the governor’s desk.
Republican attacks on the energy transition failed
The three foundational bills of Virginia’s energy transition — the Regional Greenhouse Gas Initiative (RGGI), the Virginia Clean Economy Act (VCEA) and Clean Cars — all came under attack this year, as they did last year. And again, repeal efforts failed every time.
Senate Democrats blocked the one bill that would have pulled Virginia out of RGGI. Gov. Youngkin remains bent on achieving the pullout by regulation through Department of Environmental Quality rulemaking.
In the transportation sector, every bill to repeal the Air Pollution Control Board’s authority to implement the Advanced Clean Car Standard failed in the Senate as Democrats held the line.
Efforts to undermine key parts of the VCEA failed, including House and Senate bills that would have given the State Corporation Commission more authority over closures of fossil fuel plants and require it to conduct annual reviews designed to second-guess the VCEA’s framework for lowering emissions and building renewable energy.
A House bill that would have exempted certain industrial customers categorized as “energy-intensive trade-exposed industries” from paying their share of the VCEA’s costs passed the House on a party-line basis. However, with the bill facing certain death in Senate Commerce and Labor, patron Lee Ware, R-Powhatan, requested it be stricken. At the time, he had reason to expect that a compromise approach proposed by Sen. Jeremy McPike, D-Prince William, would pass. McPike’s bill would have had the SCC put together a group of experts to study the issue and make recommendations. After passing the Senate, however, McPike’s study bill went to House Energy and Commerce, which insisted on amending it to mirror Del. Ware’s bill. That did not go over well in the Senate, where the House substitute was unanimously rejected. McPike then asked the Senate to kill his own bill, and the energy-intensive trade-exposed industries got nothing.
Raids on the VCEA produced mixed results
One of the VCEA’s strengths is in creating incentives for clean energy. That’s also a vulnerability, because everybody and their brother wants in on the incentives — and this year, once again, the brothers came peddling some pretty sketchy stuff.
In the end, however, the VCEA sustained little damage. An effort to open up the renewable energy category to coal mine methane was modified to become simply a policy to encourage the beneficial capture and use of methane that would otherwise escape from old coal mines into the air. However, methane extraction jobs in four Southwest Virginia counties will now qualify for a “green jobs” tax credit.
More successful was an effort by the forestry industry to allow more woody biomass to qualify for the renewable portfolio standard (RPS); this was in spite of drawbacks including high levels of pollution, expense and large climate impact. As passed, the House and Senate bills will allow Dominion-owned biomass plants to remain open and have their output qualify for the RPS, so long as they burn only waste wood from forestry operations. Climate advocates opposed the change, but remain hopeful that Dominion and the SCC will want to close these uneconomic biomass plants to protect ratepayers.
Two different Housebills that tried to shoehorn nuclear and hydrogen into the RPS failed in the Senate. A third bill promoting small modular nuclear reactors (SMRs) got more traction initially; it would have had the SCC develop a pilot program for SMRs with a goal of having the first one operational by 2032. After it passed the House, the Senate Commerce and Labor committee adopted amendments to require the SCC to examine the cost of any SMRss relative to alternatives, and to prevent ratepayers from being charged for the costs if an SMR never became operational. The Senate voted unanimously for the bill with these protections included, but the House rejected them. Ultimately, the bill died, a remarkable setback for the governor’s nuclear ambitions.
Utility reform consumed most of the session (again)
Dominion’s money grabs have turned into near-annual food fights. This one almost wrecked the cafeteria.
The action proceeded along two fronts. One consisted of bipartisan, pro-consumer House and Senate legislation promoted as the Affordable Energy Act, intended to return ratemaking authority to the SCC. As passed, it merely authorizes the SCC to modify Dominion’s or Appalachian Power’s base rates going forward, if it determines that current rates will produce revenues outside the utility’s authorized rate of return. If that strikes you as hard to argue with, you’re not alone; no one in either chamber voted against it.
Far more divisive was Dominion’s own effort to secure an increased rate of return on equity (ROE). This legislation earned its own bipartisan support from Dominion loyalists, led by Senate Majority Leader Dick Saslaw, D-Fairfax, for the Senate bill and House Majority Leader Terry Kilgore, R-Scott, for the House bill.
As initially drafted, it probably should have been called the Unaffordable Energy Act instead of the reassuringly bureaucratic-sounding Virginia Electric Utility Regulation Act. The bill described a formula for determining Dominion’s allowed ROE that SCC staff calculated could result in an ROE as high as 11.57%, up from the currently-allowed 9.35%. SCC staff told legislators this could cost ratepayers $4 billion through 2040. In return, the bill offered some near-term savings for customers but also would have removed the last vestige of retail competition and opened VCEA coal plant retirement commitments to second-guessing by the SCC.
Dominion pulled out all the stops. The company supplemented its own in-house lobbying corps of 13 with another 17 top lobbyists from around Richmond. Former senator John Watkins signed on, as did former FERC commissioner Bernard McNamee. CEO Bob Blue showed up personally to push the bill. Dominion ran full-page ads in the Washington Post and Virginia newspapers touting a provision of the bill that would save ratepayers $300 million (neglecting to mention that it was the ratepayers’ own money). The ad featured a dog so people could be sure Dominion was being friendly.
It didn’t work. The consumer advocates hung tough, and Gov. Youngkin, possibly a cat person, added his weight to the resistance. As the Mercury reported, the “compromise” that all parties now swear they are delighted with gives Dominion very little kibble. The coal plants will be retired on schedule, ratepayers will see savings and a larger percentage of over earnings will be returned to customers in the future. In exchange, Dominion’s future return on equity will be bumped up to 9.7%, but only for two years, after which the SCC will have discretion to set the ROE as it deems fair. (That is, if Dominion doesn’t start the next food fight first.)
Appalachian Power had its own troubles this session. APCo-only legislationthat would have replaced the requirement for an integrated resource plan with an “annual true-up review” was radically amended to become an entirely different bill. It now allows both utilities to finance the high fuel costs they’ve incurred due to soaring natural gas and coal prices. The amendments were welcomed both as a way to handle the fuel debt and so that no one had to figure out what a true-up review is. The bills passed handily.
One other successful piece of legislation may help avoid future food fights. Sen. Scott Surovell, D-Fairfax, and Del. Kilgore worked together to resuscitate the Commission on Electric Utility Regulation (CEUR) and create more transparency around utility planning. The original bill also created a structure for state energy planning, but that proved too much for House Republicans, who amended it down to the lean bill that passed.
Over the years CEUR earned a bad reputation as an entity that rarely met but that served as an excuse for legislators to defer action on pro-consumer bills. That makes advocates somewhat wary of this bill. On the other hand, provisions welcoming stakeholders into the utility integrated resource planning process seems likely to benefit the public, if not the utilities.
Elsewhere, consumers did poorly
Dominion may have taken a drubbing on its money grab, but it did pretty well in guarding its monopoly. The Dominion-friendly Senate Commerce and Labor committee killed a bill to allow customers to buy renewable energy at a competitive rate from a provider other than their own utility. Bills to expand shared solar passed the Senate but died in the House.
Indeed, the House turned into a killing field for any bill with the word “solar” in it, no matter how innocuous or popular. A House Rules subcommittee killed a bill that would have helped schools take advantage of onsite solar, though it had passed the Senate unanimously. A resolution to study barriers to local government investments in clean energy was left in House Rules. A bill to create a solar and economic development fund passed the Senate but was tabled in House Appropriations. A resolution directing the Department of Transportation to study the idea of putting solar panels in highway medians never got a hearing in House Rules. A consumer-protection effort for buyers of rooftop solar was tabled in House Commerce and Energy. A bill clarifying the legality of solar leases passed the Senate unanimously, only to be left in House Commerce and Energy.
Do we detect a little frustration on the part of House Republicans at the complete failure of their anti-clean energy agenda? Why, yes. Yes, we do.
The only pro-consumer legislation to pass was a very modest bill requiring the SCC to establish annual energy efficiency savings targets for Dominion customers who are low-income, elderly, disabled or veterans of military service. But legislation that would have made homeowners eligible for low-cost loans through property-assessed clean energy (PACE) programs failed.
Offshore wind remains on track
Dominion beat back an effort to make it hold ratepayers harmless if its Coastal Virginia Offshore Wind project fails to produce as much energy as expected. A bill to allow the company to create an affiliate to secure financing for the project passed.
Legislation to move up the VCEA’s deadline for offshore wind farm construction from 2034 to 2032 passed; the law now also requires that the SCC consider economic and job creation benefits to Virginia in overseeing cost recovery. However, a bill that would have required the SCC to issue annual reports on the progress of CVOW failed. That bill would also have required the SCC to analyze alternative ownership structures that might save ratepayers money.
The gas ban ban fails again
This year’s attempt to bar local governments from prohibiting new gas connections passed the House on a party-line vote but was killed in Senate Commerce and Labor. A Senate companion bill from Democrat Joe Morrissey, which had caused something of a tizzy initially, was stricken at Morrissey’s request.
And this year’s big winner is … Amazon!
With data centers now making up over 21% of Dominion’s load and since they have already sucked up over a billion dollars in tax subsidies, this should have been the year Virginia government woke up to the need for state oversight of the industry. Alas, no. Bills that would limit where data centers could be sited failed. Senate legislation that would have simply tasked the Department of Energy with studying the impact of data centers passed the Senate on a voice vote but was killed in a subcommittee of House Rules on a 3-2 vote, the same fate suffered by a similar House bill.
Who could be against studying the impact of an industry this big? Aside from the data center industry that is enjoying the handouts, the answer is the Youngkin administration. The governor is so pleased with Amazon’s plan to spend $35 billion on more data centers across Virginia that he promised the company even greater handouts.
Those handouts take the form of a bill creating the Cloud Computing Cluster Infrastructure Grant Fund, with parameters that ensure only Amazon gets $165 million. In addition, the far more impactful sales and use tax exemption, currently set to expire in 2035, will be continued out to 2040 with an option to go to 2050; again, this is all just for Amazon, unless some other company manages to pony up $35 billion in data center investments. In return, Amazon must create a total of just 1,000 new jobs across the entire commonwealth, and only 100 of them must pay “at least one and a half times the prevailing wage.” A jobs bill, this is not.
With the sales and use tax exemption already costing Virginia $130 million per year and growing rapidly, this legislation will be very costly. You would not know it, though, from the budget analysis performed for legislators. Through the magic of accounting rules, that analysis managed to conclude that the budget impact of this legislation would be zero.
As preposterous as that is, it may explain why only a few legislators voted against the bill. They have no idea what the governor is getting us into.
Senator Chap Petersen talks with advocates at the General Assembly on February 3. Photo courtesy of Piedmont Environmental Council
In 2019, with Northern Virginia’s data center boom well underway, I worked with the Sierra Club to provide comments to the Department of Environmental Quality (DEQ) on a proposed major source air permit for a data center.
We urged that the data center, owned by Digital Realty, be required to minimize its reliance on highly-polluting, back-up diesel generators by installing on-site solar and battery storage. While rooftop solar alone wouldn’t produce more than a fraction of the energy a data center uses, solar panels and batteries could provide a strong first line of defense against grid outages, without the air pollution.
It wasn’t a new idea; other data centers elsewhere were using clean energy and storage or installing microgrids capable of providing all of the power the facility needed. Yet DEQ rejected the suggestion and gave the go-ahead for the data center to install 139 diesel generators with no pollution controls.
Three years later, data centers have proliferated to such a degree that the power grid can’t keep up. DEQ is now proposing that more than 100 data centers in Loudoun, Prince William and Fairfax counties be given a variance from air pollution controls so they can run their diesel generators any time the transmission system is strained. DEQ is taking comments on the proposal through March 14 and will hold a hearing at its office in Woodbridge on February 27.
As a resident of Fairfax County, I’ll be one of the people forced to breathe diesel pollution to keep data centers running. Make no mistake: There would be no grid emergency without these data centers’ thousands of megawatts worth of electricity demand. And there wouldn’t be a threat to Northern Virginia’s air quality without their diesel generators.
It’s fair to ask: Should these data centers have been built if the infrastructure to deliver power to them wasn’t ready? I’d also like to know why DEQ thinks it’s okay to impose on residents the combined pollution from many thousands of diesel generators firing at once, when it has known since at least 2019 that viable, clean alternatives exist.
Batteries alone are an obvious solution for short-term emergency use, and can provide exactly the kind of help to the grid that will be needed this year. Instead of calling on data centers to run diesel generators, a grid operator can avoid the strain by tapping into a data center’s battery, a solution Google is implementing.
But data centers can economically lower their energy and water costs as well as reduce strain on the electric grid by reducing their energy use and using on-site renewable energy. Global energy management companies like Schneider Electric, Virginia AECOM and Arlington’s The Stella Group design microgrid solutions for data centers and other facilities that need 24/7 power.
I contacted Stella Group president Scott Sklar to ask how feasible it is for Northern Virginia’s data centers to meet their needs without diesel generators, given land constraints that limit their ability to meet demand with on-site solar. He told me data centers can start by reducing their cooling load by two-thirds by using efficiency and waste heat; cooling, he says, accounts for 38% to 47% of electricity demand. Cost-effective energy efficiency can reduce energy demand by one-third, and waste-heat-to-electricity can meet another 25% to 38% of the remaining electric load. “If you cut the cooling load and use waste heat to electricity, then you only need renewable energy and batteries for a maximum of half,” he concluded. “That’s doable.”
If Virginia data centers don’t start taking these kinds of measures, the situation will get worse. This year’s grid strain may be relieved through construction of new generation and transmission infrastructure, but the industry’s staggering growth rate threatens to create future problems. In 2019, when the Sierra Club was urging DEQ to think about the environmental impact of data centers, the industry consumed 12% of Dominion Virginia Energy’s total electric supply. Today, that number has risen to 21%, a figure that does not include the many data centers served by electric cooperatives rather than Dominion.
Just last month, Gov. Youngkin announced that Amazon Web Services will invest $35 billion in new data centers in Virginia, at least doubling Amazon’s existing investments here. By way of thanks, Youngkin wants taxpayers to provide up to $140 million in grant funding to Amazon and extend Virginia’s already-generous tax subsidy program. Ratepayers would also subsidize the build-out by contributing to the cost of new generation and transmission.
Amazon claims to lead the list of tech companies buying renewable energy, though its investments are mostly in other states and abroad. A scathing report in 2019 showed Amazon owned the majority of the data centers in Virginia at that time, but had made few investments in renewable energy here. Since then, Amazon has developed new solar facilities statewide, including enough to power its new Arlington headquarters. But as I discussed in a previous column, all the solar in Virginia would not be enough to make a dent in the energy appetite of Northern Virginia’s data centers, of which Amazon owns more than 100.
I have no special beef with Amazon, but I do think that a rich tech company with pretensions to sustainability leadership should do more to walk the walk in the state that hosts so much of its operations. Surely that includes not relying solely on diesel generators for back-up power at its data centers.
I also have no beef with data centers in general. They provide necessary services in today’s world, and they have to go somewhere. Data centers could be a valuable source of revenue and economic development for Southwest Virginia and other parts of the state that are not grid-constrained, if there are guardrails in place to protect nearby communities and the environment, and if they help rather than hurt our clean energy transition. Right now, none of this is the case.
Unfortunately, Gov. Youngkin not only doesn’t want guardrails, he doesn’t even want to know where and why they are needed. On February 3, a representative of his administration spoke in committee in opposition to legislation filed by Sen. Chap Petersen, D-Fairfax that would have the Department of Energy and DEQ study the impact of data centers on Virginia’s environment, energy supply and climate goals. The Senate agreed to the study, but a similar bill died in the House, and a House subcommittee killed Petersen’s Senate version Monday on a 2-1 vote. (The vote was later changed to 3-2 when two delegates who missed the meeting, and the discussion, added their votes. Killing a bill in a tiny subcommittee is one way House procedures allow delegates to avoid accountability on controversial issues — but that’s a topic for another day.)
I spoke with Sen. Petersen by phone after the subcommittee hearing. He pointed out that the administration would have been able to shape the study any way the governor wanted, and would have had control over the recommendations as well. Petersen’s conclusion: “He just doesn’t want anyone looking at it.”
Refusing to look at a problem, however, never makes it go away. And in this case, the problem is just getting bigger.
This article was originally published in the Virginia Mercury on February 15, 2023.
Update: On March 7, DEQ issued a new permit variance limited to data centers in Loudoun County. Although DEQ doesn’t say so, it appears that the original proposal has been modified. The comment period will now run through April 21, and another hearing will be held on April 6.
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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