This story was reported and written by VPM News.
Data centers, long a part of Virginia's economy and landscape, have grown into a major political issue since the last gubernatorial race in 2021.
The Commonwealth is home to "Data Center Alley" — according to the state Joint Legislative Audit and Review Commission, Northern Virginia held 13% of global data center capacity in 2023. Proximity to Washington, DC, access to fiber systems plugged into major underwater communications cables and favorable tax policies have all contributed to their ubiquity in Northern Virginia.
The global significance of the data infrastructure in Virginia was underscored this month when a system error in US-East-1, a cluster of Amazon Web Services data centers in Northern Virginia, caused widespread online service outages. Streaming services, food delivery apps, hospital systems, smart home devices and more were affected in more than 60 countries, according to DownDetector, a site that aggregates reports of web outages.
But with space running out in Northern Virginia and some local policies changing — data center-heavy Loudoun County ended by-right zoning for the facilities this year — developers looking for somewhere to put hyperscale artificial intelligence-enabled facilities are expanding their footprint throughout the state. They're making proposals from Greater Richmond to Southside to Southwest.
Criticism of the rapid buildout of the facilities is growing, too — residents are raising concerns over energy bills and environmental advocates worry about straining the environment and delaying the state's transition to carbon-free energy sources.
Whether it's Republican Winsome Earle-Sears or Democrat Abigail Spanberger, much of the next governor's energy policy will be crafted in the shadow of these facilities, which could double peak demand in a decade.
The landscape
Dan Diorio, vice president of state policy for the advocacy group Data Center Coalition, told VPM News that data centers have brought lots of opportunities and income to Virginia localities.
"Data centers are the backbone of the 21st century economy. It's healthcare records, it's banking and financial transactions, it's local governments," Diorio said. "It really is essential infrastructure."
Diorio believes that Virginia will continue to be the data center capital of the world, but said the landscape is becoming more competitive as other states see the economic benefits — adding 74,000 direct and indirect jobs and $9.1 billion in state gross domestic product annually, according to a state report.
Diorio said the next governor should avoid statewide restrictions on their development. He said labor groups, bipartisan local and state-level politicians, and economic developers agree "these one size fits all solutions really take away that ability of a local government to attract economic development projects that best fit their needs."
It's not just data centers themselves that have taken root in Virginia.
Businesses that contribute to the supply chain that makes data center construction possible have also found homes and expanded in the commonwealth, from enclosures designed to protect the critical infrastructure to nuclear energy research and development to serve the mammoth power demand.
Gov. Glenn Youngkin visited one such company in the weeks leading up to Election Day. Hyper Solutions manufactures equipment that distributes power to servers inside data centers and cools them efficiently. It builds the tech in factories around the country with a decentralized supply chain model, but its headquarters and prototyping facility are in Henrico County.
"Innovation at work," Youngkin said.
Youngkin has stressed behind-the-meter, onsite power generation for facilities — a solution his administration has supported through the adoption of nuclear technology like small modular reactors and fusion reactors — as a way to avoid direct impacts to ratepayers, "so that data centers can bring their own power supply."
He's also hopeful that the facilities will get more energy-efficient, arguing that it's in the best interest of the companies to reduce their energy costs.
But that wouldn't necessarily cut into projected demand growth. Environmental advocates say it might just mean facilities add more computing power.
The governor also called for the General Assembly to revisit the Virginia Clean Economy Act, saying it limits the state's ability to meet that demand growth by requiring fossil plant retirements and limiting Dominion Energy's ability to build new ones.
"We want more data centers here," he said. "It's a big driver for our economic future and for our national security."
Making the connection on energy policy
In a time where affordability is at the top of voters' minds, candidates have seized on data centers as a way to push their proposals.
Earle Sears echoed Youngkin's VCEA criticisms, and said at her Oct. 9 debate with Spanberger that it's clear Virginia needs to take advantage of a broad portfolio of energy sources — including those that emit climate-warming greenhouse gases — to ensure reliability at the lowest price point.
"We need clean coal, we need oil, we need nuclear, we need natural gas, and we need, yes, renewables," she said. "My opponent's only plan is solar and wind. Well, what happens when the sun goes down?"
Spanberger tied Earle-Sears to Trump's energy policy, including a US Environmental Protection Agency decision to pull back $156 million for residential solar installations.
"This is all the while that energy costs continue to rise for Virginians," Spanberger said.
Her campaign has received money from Clean Virginia, the political action organization founded by Charlottesville multimillionaire Michael Bills to challenge Dominion's political spending. CV has argued that renewables are a cheaper solution than gas plants — the technology is available and getting cheaper over time, and doesn't rely on fuels that can have volatile prices.
Brennan Gilmore, executive director of the group, said the message is "hitting home with a lot of households around the state."
CV spoke to the public throughout October on its "The Energy Bills are Too Damn High" campaign tour. "There was a lot of hunger to understand why, and we talked about some of the causes of rising prices in the energy sector," Gilmore said at the tour's Richmond stop.
Striking the right balance
There's also the question of how costs are divided up among customers.
The next governor will likely come into office shortly after regulators at the State Corporation Commission decide how Dominion should charge data center owners for the new investments they are spurring.
Dominion has pushed to lock data centers and other high-demand facilities into certain payment terms regardless of whether the demand materializes. Data center developers have pushed back on that proposal, saying it puts too much risk on investors.
Spanberger indicated that if she was not satisfied with the SCC's decision, she would push the General Assembly to pass a law to ensure developers are "paying their fair share" — but she didn't say exactly what that looked like to her.
Diorio said those decisions should stay with regulators.
"The SCC really has the right expertise and jurisdiction to decide these issues," he said. "These are significant issues that require detailed analysis and stakeholder participation, and I think it's really key that this be done in the regulatory setting."
The answer to energy affordability woes may not be to tell hyperscalers to find another state, however.
Research from the Lawrence Berkeley National Laboratory and the Brattle Group — which also assembled a report on Dominion's proposed Chesterfield Energy Reliability Center — suggests that adding these large loads may actually soften the retail electricity price increases from other upgrades to the transmission and distribution grid. Those upgrades include infrastructure serving new energy facilities and storm-hardening measures.
However, the report also notes that across the country, residential rates have risen faster than industrial rates.
"Load growth over this historical period was led by commercial customers, and cost allocation practices have tended to benefit those large, non-residential customers," wrote the researchers.
And when the demand necessitates new infrastructure, as it does in Virginia, that gap in cost burden can feel more pronounced without adequate residential ratepayer protections.
According to Diorio, more growth is coming as the industry diversifies into new industries and applications.
"All of these different varieties of data center companies are needed to meet the demand that we're seeing, because right now, we are not meeting the demand. The demand curve is on a steep rise and we are still behind meeting it."
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