Massive energy use by data centers could lead to higher electric bills
Energy demand is soaring in Virginia due to the boom in data centers, and that could result in higher utility bills for residential customers, according to a report released Dec. 9 by the General Assembly’s Joint Legislative Audit and Review Commission (JLARC).
An independent forecast commissioned by JLARC found that “unconstrained demand for power in Virginia would double within the next 10 years, with the data center industry being the main driver.”
The JLARC study is expected to inform legislators drafting data center bills in the 2025 session of the General Assembly.
Rising utility costs
A typical residential customer of Dominion Energy could expect a monthly cost increase of $14 to $37 a month by 2040, the report predicts.
That increase would be needed to offset Dominion’s rising infrastructure costs for new power generation and transmission infrastructure.
Without considering the mandate for alternative energy sources in Virginia’s Clean Economy Act, JLARC states, new natural gas facilities would need to be added at the rate of about one large 1,500-megawatt plant every two years for 15 consecutive years.
The report suggests the General Assembly could require data centers to address their energy impacts by promoting the development of renewable energy generation, but that “would have only a marginal impact on decreasing data center energy demand.”
Impact on residences
The JLARC study also says: “The industrial scale of data centers makes them largely incompatible with residential uses. One-third of data centers are currently located near residential areas, and industry trends make future residential impacts more likely.”
It’s ultimately up to local governments to consider more restrictive zoning ordinances, rezoning requests, and permits to minimize the impact on residential neighborhoods, it says.
The report also cites the negative impact of noise emitted by data centers on residents.
“Data centers emit low-frequency noise that is not loud enough to damage nearby residents’ hearing and rarely loud enough to violate noise ordinances,” JLARC notes. “However, some nearby residents report that the constant noise generated by some data centers affects their well-being.”
The report recommends that local governments be authorized to require sound modeling studies for proposed data center developments.
It also calls for local governments to “establish and enforce maximum allowable sound levels for operational data center facilities using alternative low-frequency metrics and zoning ordinances.”
Tax exemption
Since 2010, Virginia has offered an exemption to the state’s retail sales and use tax to attract large-scale data centers. That allows data centers and their tenants to purchase computers, servers, network infrastructure, cooling equipment, and generators without paying sales tax.
The exemption provided the industry with $928 million in tax savings in FY 2023.
JLARC suggests that the tax exemption could be used as an incentive to get data centers to address some of the problems they cause, such as environmental impacts and noise.
The exemption is set to expire in 2035. The report says the General Assembly could let the exemption expire if it wishes to slow the data center industry’s growth in Virginia because it determines that the increased energy costs to customers outweigh the industry’s economic benefits.
As an alternative, it says, the General Assembly could allow the exemption to expire in 2035 and then apply a partial sales tax exemption until 2050.
A huge market
Northern Virginia is the largest data center market in the world, JLARC notes, “constituting 13 percent of all reported data center operational capacity globally and 25 percent of capacity in the Americas.”
The tax incentive has help drive that growth, along with the region’s strong fiber network, supply of reliable cheap energy, available land, and proximity to major national customers.
While data centers provide economic benefits in Virginia, that’s mostly during construction, the report says. Data centers employ fewer people than other industries, but those jobs tend to be high paying.
Overall, the data center industry is estimated to contribute 74,000 jobs, $5.5 billion in labor income, and $9.1 billion in GDP to Virginia’s economy annually, JLARC states. However, “most of those economic benefits derive from the construction phase rather than data centers’ ongoing operations.”
12 responses to “Massive energy use by data centers could lead to higher electric bills”
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Buy an electric car and e- lawn mower and snow blower and tvs for the kids rooms and a small fridge for you wine and more Christmas inflatables and blame the data center because of electricity demands and costs.
If I obtain a parcel of land and decide to build a structure, residential or commercial, either one, I seriously doubt Dominion will raise rates of my neighbors to help pay for my electric bills. I’ll have to pay for the hookup, equipment and usage. The data centers should be paying the cost for their building and usage.
In what world do the rich and powerful ever pay for their fair share?
In every possible version of this wold the rich and powerful pay exponentially more in taxes than the average person, because they have more. The difference is what perspective of “fair” one has. Clearly you perceive that others creating more, providing more services, and making more than yourself never pay enough taxes. I wonder if you also hold the perspective that those making less than yourself should never pay taxes. In reality, both perspectives are skewed to failure labeled as fairness. Economic business development is a common competitive condition to bring in jobs and businesses that improve communities with time limited local or state tax breaks.
“Economic business development,” you mean like taxpayers paying for these data centers? Or paying for a new stadium for the Wizards? or Cammanders? or paying Amazon to come to Arlington?
Sounds like you are saying its a good thing that the rich are willing to negotiate with us poors for special rules and benefits for themselves, otherwise we’d starve because they wouldn’t give us jobs.
It’s not fair to raise prices for residential customers. Make the data centers pay for their electricity usage.
Everyone including data center operators pay for their electricity use, and rates are set be government regulators. In fact and recently, Google is working with Dominion Power to buy mini-reactors for powering data centers. In another state Microsoft is paying to restart a full size reactor to power their data center. Thus adding capacity and paying to build it as well as paying to receive it.
What do people think will happen when we are forced to go to all electric cars? Demand will far outweigh the capacity since almost nothing is being done to add electrical plants and cables throughout the country. Then prices will skyrocket for everyone. Ask your politicians about this since a lot of them support it. We will be like California who has to cut power when it lightnings and has rolling blackouts when the weather gets hot. Fun times, huh?
Some data centers also often are large users of water for cooling purposes (hence why they’re not found in the southwest desert, where there is lots of solar power). They’re also remove all vegetative matter and become part of the concrete/metal/pavement jungle. That increases water runoff, loose ground water permeation and retention and buffering that happens from exposed ground (even if it is just a lawn versus normal woodlands). The large metal, concrete, pavement become heat islands which hold and retain heat in summer. Most have HUGE backup diesel generators for when the power goes out, which need to run at load for monthly test, so it’s adds pollution and noise. And the possibility for fuel spills from the tank leaks. Data Centers once operational are not huge local tax revenue generators. During the build, there is a big splurge in construction and then technical engineering as the technology is installed to operate. Then immediately they have limited employment – maybe some contracted security personnel, facility maintenance (power, plumbing, HVAC), contractors to mow the lawns and plow snow off the little used parking, and a handful of techs who will normally cover several data centers for normal maintenance. These techs are not the higher paid engineers (who come in and initially setup) either, they replace bad hard drives, power supplies and install/swap an occasional server. There are some higher paid engineers who will monitor and do remote service of many tens to hundreds of thousands of servers, some may be live hear, but most likely the majority do not. So, it’s not a huge number of jobs contributing to tax base. And because of this limited employment at each location, there is not a huge uptick in other local businesses for employees buying coffee or lunch, etc.
And utilities are burning more fuel in VA (and also WV) to source power this way. New pathways are being carved (and planned) through national forest and park land for new natural gas lines and power lines.
Some of these data centers may have priority restoration of utility services, above homes and other businesses when the next storm drops powerlines – because they may be housing critical systems (telco, governmental, etc).
They generally lower the real estate values in the immediate vicinity as well.
All things to consider when our elected officials are support more of these and may offer big tax breaks to this industry.
I can understand that there is some level of increasing residential demand as well going on as customers buy BEVs, but I agree with other commentators in that if the data centers are going to be a serious cost driver for dominion, then it is the data centers that should be shouldering that burden!
Hell, these data centers now a days are focused on AI which is already putting people out of work. It’s just insult to injury to then make residents – some of which would have been put out of work because of them – to have to pay for them.
I live in Ashburn, Virginia and can share what we had few momentary outages of electric during past hot summer. It appears that Dominion Energy power source had few stoppage due to exceeded the max peak load due to high concentration of Data Center in Ashburn area. Consequently the residents are paying its penalty due to fast growth of data centers. Local politician may not be familiar with its consequences for too fast growth of data centers. Suggest to slow down the growth of data centers until developer(s) to include additional other sources to include alternate sources of energy other than Dominion Energy sources such as Solar energy & others.
After actually reading the underlying report linked, I don’t think Annadale Today’s characterizations of the report findings are entirely accurate – or rather, they seem to have highlighted only the most negative points raised. To its credit, I think the Joint Legislative Audit and Review Commission staff tried to be fairly neutral in its assessment of data centers, across all topics covered in the report as a whole.
The take aways from the report should really be that there are a number of possible outcomes related to increasing volumes of data centers- this document is merely flagging some of the possibilities that might occur and highlighting a few tools that lawmakers can use to steer policy and shift outcomes.