Data centers may be coming soon to a neighborhood near you. Virginia’s First Regional Industrial Facilities Authority is considering developing a data center in a Pulaski County industrial park. Three other Southwest Virginia sites are in the planning stages for data centers, in Botetourt, Wise and Wythe Counties. Of course, most folks who see a data center being proposed close to where they live are against it – perhaps just another example of the well known Not in My Backyard (NIMBY) syndrome. More difficult to evaluate is just how good are they for Virginia. We currently lead the entire world in data centers, with more than one third of all data centers globally being in Northern Virginia. Most of our political leaders have long supported their development here, as they bring jobs and tax revenue. Yet, they also bring noise, industrialization of existing land including potential air pollution, new transmission lines and accompanying towers, and use large quantities of water and tremendous amounts of electricity.
One of the key issues is where would the electrical power come from? Keep in mind that Virginia is the nation’s second largest importer of electricity, behind only California. A lot has been done this year by the legislature to try to better use existing energy sources in Virginia. This includes legislation to encourage the use of data center waste heat, acceleration of the permit process allowing utilities to buy renewable energy, an energy assistance and weatherization program to help low-income utility customers reduce their electrical use and streamlining of the process to allow large-scale battery energy storage. Additionally, Dominion Energy and Appalachian Power will need to provide energy efficiency upgrades within their service areas, while providing more of their energy from renewable sources. Very helpful to the state will be completion of Dominion’s offshore wind project, which is projected to power up to 660,000 customers. Energy from these turbines started being delivered to the grid back in March, with full project completion scheduled for early 2027.
Legislators continue to wrestle with how to best capture the benefits of data centers. Many data centers came to Virginia, at least in part, because of tax breaks given for locating here. Our Senate is supporting ending these tax breaks early to provide additional state funding. The House of Delegates is proposing to continue these breaks, while imposing additional environmental and energy standards. It is very interesting that this is not a partisan debate – it seems (at least to me) a reasonable question as to what best to do independent of political party. Certainly, it would be helpful to capture almost $2 billion to help the state’s budget – but would it be fair to renege on an earlier promise that incentivized these centers to move here? Or would the data centers move to a friendly state, and we would lose jobs and future taxes? Our state budget must be finalized by June 30, and it will be interesting to follow what we do.
