This story was originally reported by Inside Climate News.
Tyler Ray and his husband were drawn to their community, Bren Pointe, by the amenities that make Fairfax County such a desirable place to live in the Washington, D.C., suburbs of Northern Virginia. It’s close to shopping, dining and entertainment in Old Town and not far from Reagan National Airport.
Soon, though, the neighborhood could be home to a warehouse-like data center at Plaza 500, a five-acre substation 60 feet from Bren Pointe’s boundary on the other side of Turkeycock Run.
The State Corporation Commission, which regulates Virginia’s utilities, is reviewing the transmission project in Ray’s Alexandria neighborhood. The state’s legislative research arm, the Joint Legislative Audit and Review Commission, or JLARC, says the line is “too close” to residents.
“I think the SCC right now has the opportunity to say ‘no more’ until we identify where the cost allocation should be, and where data centers are and aren’t appropriate,” said Ray, 37, who does advocacy work before Congress on outdoor reaction issues.
The project could also include 120-foot-tall transmission towers for the high-capacity electric lines needed for the server farms to power the internet, cloud computing, artificial intelligence and crypto mining—all thirsty for electrons.
“The number of devices connected to the internet per household now is 21,” said Josh Levi, president of the Data Center Coalition, an industry group, at the Virginia Clean Energy Summit last fall. With two teenage children at home, he added he wasn’t sure if he was “proud or embarrassed” to have 50 connected devices in his home, which can include smart thermostats, vacuum cleaners and more.
Residents, utilities, the industry and governments are grappling with the world’s race to artificial intelligence, which can be an economic boon for localities. But who pays for the upgrades needed to serve data centers: those customers or everyday people?
Virginia is home to the largest concentration of data centers in the world, hosting 13 percent of the world’s data center capacity, according to the Joint Legislative Audit Review Commission. Northern Virginia is home to data centers that need 4,140 megawatts of electricity, according to the December 2024 Joint Legislative Audit and Review Commission report. It’s estimated that 70 percent of the world’s internet traffic moves through those servers.
There’s also cryptocurrency, which is increasingly accepted as a form of payment at businesses like Tesla, the electric vehicle run by billionaire Trump supporter Elon Musk.
Bitcoin, the largest and best-known cryptocurrency, is managed by a decentralized network of Bitcoin users. A network algorithm assigns each transaction a unique random identifying code, which Bitcoin “mines” derive by operating powerful banks of computers day and night running endless series of random numbers to break those codes. Trump now says he wants America to be the “crypto capital of the world.”
The next-largest data center market in the world is Beijing with 1,860 megawatts of electric power need. Hillsboro, Oregon, a high-tech region known as Silicon Forest, is the next largest with 1,660 megawatts of electricity needed.
At the moment, Dominion Energy, Virginia’s largest utility, has forecast peak demand of 17,353 megawatts for 2024. A supplemental filing on Dominion’s Integrated Resource Plan, a nonbinding 15-year planning document, shows that with data center demand the peak load increases to 26,623 megawatts by 2039. Without the data center growth, the peak demand grows to 18,608 megawatts, the utility says.
“Data center companies build where they are permitted to do so under local zoning ordinances, rules, and regulations,” Levi said in a statement. “The industry is committed to being a good neighbor in communities where data centers locate, and the industry brings a wide variety of benefits to local communities, including significant investment, high quality jobs, and tax revenue that helps fund local priorities.”
But all that projected additional load on the grid requires new transmission lines to deliver power, sometimes from out of state, to the substations before power is distributed to the data centers.
At the same time, on a recent earnings call, Dominion shared that a new transmission line installed would open up more capacity to bring on more data centers, amid questions from investors on whether the load forecast of 40 gigawatts of demand from data centers under contract as of December last year, up about 19 gigawatts, or 88 percent, from July will actually pan out. In Virginia, the costs for these infrastructure improvements from utilities are all recovered from ratepayers. The Fairfax County project, one of almost 200 transmission ones the utility is planningfor over the next 15 years, is estimated to cost about $23 million. One witness in the case argued a capital investment of $20 million would increase a typical residential customer bill by $.015 a month.
Jon Gordon, policy director at Advanced Energy United, a trade association representing clean energy companies, said Dominion has “almost been lethal” in its pursuit of this project, acknowledging that data center development creates a self-fulfilling need for transmission lines, more data centers and more transmission lines.
“It’s such good business for them,” Gordon said. “When they build these lines and whatever, if costs go up significantly, they just pass those costs along (to the ratepayers). It’s not like Dominion shareholders eat cost increases.”
Dominion Energy spokesperson Aaron Ruby did not respond to a request for comment.
Economic benefits
All the construction needed to build those facilities comes with economic benefits, which in Virginia involves investment from four of the top six wealthiest companies in the world— Amazon, Google, Microsoft and Meta.
In Virginia, data centers have contributed about 74,000 jobs and $9.1 billion, or about 1 percent, annually to Virginia’s gross domestic product, the Joint Legislative Audit and Review Commission found, primarily due to construction. In 2024, the state’s GDP was about $764.5 billion.
In 2023, data center capital investment, which is used to build, went over $24 billion. The industry investments comprised 84 percent of Virginia’s total capital spend between 2022 and 2024, according to the JLARC report.
“We’re continuing to invest heavily in the commonwealth,” Shannon Kellogg, vice president of public policy at Amazon, said during a podcast interview with the Virginia Economic Development in October. The company, which sited its first data center in the world in Virginia, and located its second headquarters in Arlington, was expected to have invested about $75.4 billion from 2011 through the end of 2024.
This year, Virginia General Assembly legislators introduced dozens of bills to provide more oversight of the industry but failed to pass any meaningful ones, industry critics say, after the Data Center Coalition and several labor unions, including IBEW Local 26, the Mid Atlantic Pipe Trades Association and the Virginia State Building and Construction Trades Council spoke in opposition.
“This industry has collaborated with their workforce better than any in my 40 years as a union organizer,” said Don Slaiman, political coordinator for IBEW Local 26, during testimony on a bill that would have given localities authority to require site protections for data centers. “We’re expanding our Manassas training center, we’d like to expand our Roanoke training center. We need that certainty…these are six-figure blue-collar jobs right in the center of Northern Virginia. That is unheard of.”
In March, Amazon asked Louisa County in central Virginia to reopen a quarry to supply stone to the Lake Anna Technology Campus, which is expected to be a collection of seven Amazon Web Services data centers totalling more than 1.7 million square feet within miles of Dominion Energy’s traditional nuclear power plant, the North Anna Power Station.
Additional companies that build heating, air conditioning and cooling equipment for data centers have invested millions in the state, including about $30 million from Munters Corporation and $57 million form Condair Group AG.
Last month, during an event Republican Gov. Glenn Youngkin promoted as a way to help with Trump’s slashing of federal jobs, stopped to ask for applause after Nick Minor, director of public affairs at STACK Infrastructure, a data center developer, shared their investment in 1,800 megawatt data center campus in Stafford County. Once completed, the center would support “over 600 high paying data center jobs with an average salary of $120,000 per year.”
“I think we have a real advantage, and that’s anything to do in the world of technology and particularly AI machine learning around the data center community,” Youngkin later said in response to a question from the Richmond Times-Dispatch about the impact of tariffs on Virginia’s economic development at a different event. “I’m not sure that the (Virginia Port Authority) is going to see diminished traffic. What I do expect is that the supply chains will be moving.”
Why Virginia?
The prominence of the industry in the state can be traced back to the internet being birthed in Northern Virginia by the Department of Defense’s Defense Advanced Research Projects Agency, or DARPA.
The region became home to a strong network of fiber optic internet cables to connect data centers so the federal government and defense contractors can access their data more quickly. More fiber cables mean more facilities can communicate with each other, thereby decreasing the latency, or lag time, to pull up information.
In 2010, Virginia sought to lure data centers by offering them a tax exemption from retail sales and use taxes for qualifying computer equipment in exchange for investment and employment requirements. Then, coupled with Hurricane Sandy in 2012 damaging trans-Atlantic fiber optic cables in New York and New Jersey, which led to disconnections between the U.S. and Europe, developers decided another entry point for the internet to create redundancies.
Enter the three subsea fiberoptic cables that land in Virginia Beach and are routed about 110 miles West along Interstate-64 to Richmond and then over 100 miles north along Interstate-95 to feed Data Center Alley in Northern Virginia, or NoVa.
Areas like Loudoun County, which is home to “Data Center Alley,” an estimated 43 million square feet of data centers, are expecting about $895 million from real and personal property tax revenue, which would equal about 95% of the county’s entire $940 million operating budget. Because of the constant upgrades to the computer processing equipment inside data centers, local taxes keep coming in.
That local revenue can offset local taxes and help schools, said John Martin, president and CEO of RVA757 Connects, an economic development group working to make an I-64 Innovation Corridor a global internet hub.
That local revenue can offset local taxes and help schools, Martin said. And the smaller amounts of people needed to operate the facilities, compared to larger housing developments, means additional school and police resources aren’t needed.
“NoVa has shown us the law of gravity. What we have seen from around the world, some of the insights that we garnered is now the more players and the more capacity that’s built with digital infrastructure, the more it generates commerce and attracts other digital infrastructure players,” said Martin. “This industry is better and stronger, the more united and wired together it is.”
What the RVA757 group is pitching is the three IXP internet exchanges and a DE-CIX internet exchange that connects the different fiber networks and “edge” data centers can be on the outside of metropolitan hubs to quickly provide service. The region has a ready trades workforce, established cyber security professionals with the Richmond Federal Reserve and the opportunity to grow a high-tech workforce to make those sites appealing for the growth and trickle-down effects from providing more internet services to manufacturers, education institutions and communities, said Martin.
“It’s really the economic opportunity of our lifetime,” Martin said. “The digital infrastructure that we have now coming together, that’s present here, is going to do more for our economy today than the build out of I-64 and -95 did in the 60s.”
Cost allocation
Growing around the country is a debate on who pays for the upgrades needed for data centers. In the State Corporation Commission’s February hearing on the transmission line in Alexandria, case in February, the customer went unnamed in Dominion’s application, though public reporting indicates the company is Starwood Capital Group, a data center developer. It did not participate in the regulatory proceedings.
“Mr Gil, I think I just have one question for you: In your opinion, but for the data center customer in this case, would this project be needed without it?” asked Will Reisinger, an electric utility regulatory attorney representing Bren Pointe and other homeowners associations, during the hearing.
“That is correct, it would not be needed without a data center customer,” responded Spencer Gil, utilities engineer with the State Corporation Commission’s Division of Public Utility Regulation.
Ray, the Bren Pointe resident and outdoor advocate, feels the data center would obstruct his views and diminish his property value.
Costs of the project weren’t discussed in this proceeding that simply approves construction of the line or not. But if the costs of the project were borne entirely by the data center customer, then more expensive routes avoiding the negative impacts, using underground lines or expanding the existing Van Dorn substation instead of building a new Edsall one could be more feasible, Ray said.
“I think data centers are here and they’re here to stay, and I don’t think that the multi billion or trillion dollar companies like Amazon and Google and meta are going to be deterred by having to pay their fair share in terms of the electrical kind of infrastructure that’s needed for these projects,” Ray said. “I think what we have is really a need to balance the desire for the economic benefit, which I think is a valid argument, but also with the quality of life and kind of enjoyment of residents who are potentially being hoisted with these massive buildings that are drastically different than anything that’s ever existed in their communities before, without really any say or input into kind of them or their impacts.”
The Joint Legislative Audit and Review Commission report found data centers are paying for their cost of service by grouping them with industrial large commercial customer rate classes, and charging them rates on their energy and system use. The utility also recovers from them costs for new distribution, the lines that feed electricity from substations directly to end users like data centers and homes, with contract payments.
“Data centers are committed to paying their full cost of service for the energy they use,” Levi, of the Data Center Coalition, said. “The industry looks forward to continuing to lean in with policymakers and regulators to ensure an affordable, resilient, and cleaner electric grid that enables the 21st-century economy.”
But Levi’s statement didn’t acknowledge JLARC’s other findings that include the new generation needing to be built, “that would not otherwise be built,” would create costs with a portion of them being recovered by non-data center customers.
The argument can be made that transmission lines benefit the larger community by supporting additional load growth and ensuring grid reliability, something the SCC hearing examiner acknowledged.
“If and when other planned or potential development that was discussed extensively in this case materializes, these facilities would be available to serve it,” wrote hearing examiner Bryan D. Stogdale.
But this line would bisect an industrial property that would hurt any future development goals for it, including rezoning it for a mixed-use development, which surrounding properties may become. And Abbott testified that the current substation would last until 2094 or 2113, more than a “lifetime” from now.
But Reisinger, in his response to the hearing examiner’s recommendation, reiterated this is a case for the commission to rule “in situations where a customer is the sole driver for a project, such customers should be responsible for the project costs.”
“This is a policy determination that should be made to properly evaluate alternatives in this case. The Commission should not defer this question to some future proceeding,” Reisinger wrote. “The issue is squarely before the Commission now. This is the proceeding where the resolution of this issue will actually matter to real people.”
Commission staff also wrote in their comments in the Fairfax County case, “Based on the record, it appears to Staff that this case presents such an opportunity for the Commission’s consideration.”
Ray’s husband, Brian Sterling, 40, a civil rights lawyer, wants to stop the transmission line in part as a possible way to force Starwood Capital to resubmit its zoning application for the Centre Plaza site and follow new Fairfax County zoning regulations that would prevent a substation from being built as currently planned.
Without the substation, he said, the developer may have to reconsider placing a “hyperscale” data center, which are more energy-intensive than smaller edge ones, or upgrade the existing substation and plan a new transmission route with underground cables.
“The whole point of all of this is to regulate the boundary between us, so that we get along, that you have reasonable, good development all around,” said Sterling. “It’s frustrating because you speak, and you prepare and you’re at it for so long and it seems like it falls on deaf ears.”
In the event the line is approved, one way cost allocations may be decided is through a new rate request filed by Dominion earlier this month that would increase monthly bills for a typical residential customer using 1,000 kilowatt hours of electricity due to growing electricity demand, the costs of electricity purchases and “inflationary pressures.”
The proposal would also create a rate class, for high-energy users, including data centers needing more than 25 megawatts, to pay for “85 percent for the transmission and distribution functions, and 60 percent of the generation function” of the demand they contract with Dominion for 14 years.
The proposal comes after other states like Ohio, introduced similar requirements of new data centers larger than 25 MW needing to pay for at least 85 percent of the energy they expect to need, even if they use less.
Also included in Dominion’s proposal is an increase in their return on equity, or profit margin from 9.7 percent to 10.4 percent.
“The data center issue is a really complicated problem that we’re going to have to figure out in the next couple of years,” said Sen. Majority Leader Scott Surovell (D-Fairfax). “It’s my understanding that once somebody wants to build a data center, the waiting time to hook it up to the grid is seven years. It’s not clear to me that we need to act immediately to deal with it, but we need to act in the next couple of years to make clear what rules are going to be for the next couple of decades.”
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