By Adam Cowie-Haskell, MEM ’25
This article was written in response to a seminar given by Katharine Bond, VP, Public Policy, State, and Local Affairs, Dominion Energy and GT Hollett, Director, Offshore Wind, Dominion Energy, in an EDGE Seminar at Duke University’s Fuqua School of Business in Fall 2023. This article voices one student’s perspective and does not necessarily represent the views of either Duke University or the seminar speakers.
In Dominion Energy’s Integrated Resources Plan (IRP), originally filed May 1st, 2023, the utility states that “rising energy demand and peak growth from data centers in Virginia are key drivers of PJM’s [Dominion] zone forecast for overall energy and peak demand.”1 Katharine Bond, Vice President of Public Policy at Dominion, highlighted the same issue in a recent lecture at Duke’s Fuqua School of Business.
Indeed, northern Virginia is known as the data center capital of the world. Loudoun County, less than an hour from Washington DC, is referred to as “data center alley” and has more than 29 million square feet of data center space.2 Dominion cites that the load from data centers peaked at 2.8GWs in 2022; it is expected to surpass 7GWs by 2032, far more than any other region.3
In response, Dominion’s IRP illustrates the utility’s plan to build at least 1,447 MWs of gas-fired generation capacity for its lowest carbon plan—the most realistic models include several hundred more MWs of carbon-emitting power plants.4 That a major utility serving a densely populated region is constructing new fossil-fuel capacity solely to address the surging demand from hundreds of data centers represents a significant oversight in the state’s approach to economic development and energy planning.
Economic developers’ failure to consider energy impacts of data centers is short-sighted
Two broader dynamics are behind this failure. The first is an absence of regulation in how states and regions weigh energy use and efficiencies in economic planning. Data centers are massive warehouses that need a great deal of energy, water, and land, suggesting their development would be similar to industry like steel mills, which are almost exclusively located in exurban and rural areas.5 Part of this reason is to be closer to power generation—moving energy long distances results in transmission line losses. Because solar and wind are cheapest when developed at scale in rural areas, it makes sense to co-locate data center hubs closer to large scale renewable generation, not populous cities where land has many competing interests, like housing. Note that data centers do not demand the labor that other industry requires, another reason to move them out of metro areas.
Land-use planning responds primarily to community priorities and tangible economic benefits, and data centers can bring in local tax revenue to the tune of billions of dollars per year across Virginia.6 Still, consider that the 7GWs of data center load expected in 2032 represents the energy demand of over a million homes—more households than currently exist in the four counties comprising Northern Virginia.7 For policymakers to fail to consider that that staggering energy need also overlaps with demand for human-oriented development like housing is short-sighted.
Virginia regulators should push Dominion to prioritize decarbonization
The second failure is in the “regulated monopoly” model we choose for the largest electricity companies in the country. Dominion passes almost all of its operating costs, including fuel, to ratepayers and makes profit on a return on equity, which is based on two things: a return rate established by Virginia regulators and Dominion’s spending on eligible capital expenditures like upgrading wires or building generation assets. The most important metric to utilities, and often their regulators, is 100% reliability at low cost.
Dominion’s IRP suggests that the utility sees dispatchable gas as its best option to reliably meet growing energy demand from data centers. Dominion’s IRP also includes building expensive and untested small modular nuclear reactors (SMRs) in four out of its five pathways.8 In either case, both types of plants would be hefty additions to the company’s rate base, especially over time as these plants require ongoing operations and maintenance. Furthermore, the 1,447 MWs of natural gas would spew countless tons of new CO2 into the air. Contrast this with solar and storage, where the upfront costs are relatively inexpensive, after which the assets have little upkeep and turn a free and limitless fuel into clean energy. In other words, renewable resources do not return as much value to Dominion’s shareholders as gas plants or SMRs.
Clearly, Dominion cannot self-regulate how it serves data centers because it isn’t incentivized to, and what is good for the public is not always good for investor-owned utilities like Dominion. It forecasts the expected data center growth in its territory and sees the opportunity to spend to upgrade the grid, build new generation, and earn its return on those costs while ratepayers—the public—eat the costs. This is already happening in northern Virginia. Dominion recently asked its regulators to include a $63.1 million transmission upgrade cost in the rate base, all to serve one customer—a data center.9
Luckily, it is not too late to make a correction. The quickest fix to Dominion’s resource carbon intensity can come from Virginia’s utility regulating body, which can reject the IRP for relying too much on natural gas generation. After all, Dominion has to meet the state’s renewable standard, which is 100% renewable energy by 2045, though this can be delayed if Dominion successfully petitions that doing so would compromise reliability. Unfortunately, regulators are also hyper-focused on reliability and are often swayed by politics. Combating a medium-term threat like climate change is often a lower priority to a hypothetical grid crisis if there isn’t enough dispatchable generation.
There is hope yet: in Dominion’s case, the Hearing Examiner, who makes recommendations to the three-person utility regulator, urged the regulators to reject Dominion’s IRP.
Second, with the right local ordinances or a state law, new data center growth can be concentrated in less populous areas and closer to large-scale renewable generation. This would lessen the need for costly transmission upgrades, lessen line losses, and represent smarter, human-oriented urban and regional planning. GridStrategies recently released a report that illustrates just how much data centers are increasing demand across the country, mostly driven by the rise of artificial intelligence.10
If Virginia addresses this issue directly, it could serve as a blueprint solution to a national problem.
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Footnotes:
- Dominion Energy, “2023 Integrated Resource Plan,” n.d., https://www.dominionenergy.com/-/media/pdfs/global/company/desc-2023-integrated-resource-plan.pdf. ↩︎
- “Data Centers,” Loudoun County Economic Development, VA (blog), accessed November 19, 2023,
https://biz.loudoun.gov/key-business-sectors/data-centers/. ↩︎ - Dominion Energy, “2023 Integrated Resource Plan,” n.d., https://www.dominionenergy.com/-/media/pdfs/global/company/desc-2023-integrated-resource-plan.pdf. ↩︎
- Ibid. ↩︎
- Union Pacific, Steel Mill Locations, n.d., https://www.up.com/cs/groups/public/@uprr/@customers/documents/up_pdf_nativedocs/pdf_up_indprod_millmap.pdf. ↩︎
- “Banks: As Demand for Data Centers Soars, so Do Economic Benefits,” Loudoun Times-Mirror, November 30, 2023, https://www.loudountimes.com/opinion/banks-as-demand-for-data-centers-soars-so-do-economic-benefits/article_46990ce8-8fb5-11ee-a217-576779ca69fe.html. ↩︎
- Northern Virginia Regional Commission, “Demographics,” accessed November 19, 2023, https://www.novaregion.org/118/Demographics. ↩︎
- Dominion Energy, “2023 Integrated Resource Plan,” n.d., https://www.dominionenergy.com/-/media/pdfs/global/company/desc-2023-integrated-resource-plan.pdf. ↩︎
- Ress, Dave, “Dominion, in rare move, details data centers’ big electricity demands”, September 17, 2023, https://richmond.com/news/state-regional/government-politics/dominion-in-rare-move-details-data-centers-big-electricity-demands/article_c91bb9ae-53ec-11ee-b6bf-17bb305e68be.html. ↩︎
- Wilson, John, and Zach Zimmerman. “The Era of Flat Power Demand Is over.” 2023. https://gridstrategiesllc.com/wp-content/uploads/2023/12/National-Load-Growth-Report-2023.pdf. ↩︎
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