Data centers are already a major source of demand in Virginia, but their growth in the coming 15 years is the main reason Dominion Energy expects its load to grow by 64%.
The State Corporation Commission held a technical conference looking into the issue Dec. 16. Data center load growth accounts for 87% of the utility’s load growth and that does not even count the fact that 60% of data center load growth is in the territory of rural electric cooperatives, Trailhead Energy Consulting’s Marc Chupka, on behalf of Clean Virginia, told the commission.
The state’s Joint Legislative Audit and Review Commission (JLARC) released a similar forecast just a week prior to the SCC meeting. (See Virginia Legislature Report Tackles How to Meet Surging Demand from Data Centers.)
“Other forecasts are actually closely clustered to the Dominion forecast — the JLARC report, PJM’s and others — but consensus does not imply accuracy,” Chupka said. “Often, forecasts of this nature are clustered, not because everyone is in agreement about how the future is going to unfold, but rather, they’re working from the same data, or very similar data, using very similar methodologies.”
Those assumptions could be off significantly, Chupka said, noting that Google just announced its quantum-based Willow chip. That advance and others could lead to much more efficient hardware in data centers, or artificial intelligence software could get more efficient, either of which would mean much lower demand from the sector going forward.
The industry is growing because consumers are more online than ever, with an average of 21 connected devices in every home, said Aaron Tinjum, the Data Center Coalition’s director of energy policy and regulatory affairs.
“Consumers and businesses will generate twice as much data in the next five years as they did in the past decade, so twice the amount of data in half the time,” Tinjum said. “This growth is driven by the widespread adoption of cloud services, the proliferation of connected devices and the rapid scaling of advanced technologies like generative AI, which alone could create between $2.6 trillion and $4.4 trillion in economic value globally by 2030.”
In the electric industry generally, 20-year forecasts can be directionally helpful, but beyond that, their value is questionable, Google’s Brian George said.
“I do think as we start to inch back towards that sort of 12-, 10-, eight-year mark, we need to start ratcheting up the confidence we have, and that is simply because of the long lead times it requires to build new infrastructure,” said George, the U.S. federal lead for Google’s Global Energy Market Development and Policy program. “But … we actually think there’s a lot of room right now for PJM to be more aggressive in addressing the load forecast adjustments that come up from its” transmission owners.
Dominion does a good job on the forecasts that it feeds to PJM that are then turned into regional forecasts, but that is not the case with all of the region’s TOs, he added. Google works to have the most efficient data centers in the world, and it has a financial incentive to continue that because energy is one of the biggest costs they incur, George said.
Data centers are focused on the state’s electric co-ops, especially around Data Center Alley in Northern Virginia, because they offer ample land that is also near transmission corridors, Rappahannock Electric Cooperative (REC) CEO John Hewa said.
“We’ve engaged with a wave of new data center members and emerging direct-serve projects with an inbound load ramp projection that climbs in excess of 16,700 MW by the year 2040,” Hewa said. “Commissioners, what I’m characterizing here is that a once-quiet and still-rural electric cooperative has an inbound load ramp that exceeds the summer peak of the New York City power control zone, actually substantially. In REC’s case, much of this load ramp is scheduled to mature quickly within the next five years.”
The co-op has set up an affiliate to serve the major group of new customers separately from the homes and smaller businesses that make up the rest of its customer base, with the affiliate serving them with market-based rates under FERC’s regulation, he added. That helps insulate other customers from any potential billing disputes, which can quickly add up to millions of dollars with hyperscale data centers, especially if the wholesale markets are impacted by an event like Winter Storm Elliott.
“I simply do not think it is right for the other members, such as residential, to have to backstop the scenario for a Virginia-based data center operating with global reach,” Hewa said. “These large-use members must provide the financial liquidity, not only for their own great infrastructure and operations, but also for backing their presence in the wholesale market and the wholesale market purchases that go with that.”
When done right, using market-based rates would protect other member consumers from subsidizing the energy demands of data centers, he added.
In Dominion’s territory, the recent growth in data center-led demand has actually contributed to lower transmission and distribution costs for residential customers, who paid 59% of the overall costs in 2020 and now pay 10% less, said Vice President of Regulatory Affairs Scott Gaskill.
“The growth in the GS3 and GS4 load classes, or rate classes, has increased over that time, which just naturally is going to reallocate costs to that load class, and you see a residential decline and that class go up,” he said, referring to Dominion’s rate schedules for business customers with a peak demand of at least 500 kW.
But past performance is no guarantee of future results, and the large infrastructure investments needed to meet growing demand from data centers, some of which is already inevitable, will lead to higher costs as seen in PJM’s capacity market already.
“I view that as probably the single largest driver to rate increases, say over the next three to five years,” Gaskill said. “Again, from the infrastructure build perspective, I think our current cost allocation methodology largely [takes] care of that, and the fact that the GS3 [and] GS4 classes are going to continue to be allocated more and more of those costs. But when we talk about the impact of energy prices — just the supply and demand in the whole PJM region — that’s going to be socialized across our system.”
The other members of the GS3 and GS4 rate classes are often the Virginia Manufacturing Association’s members, which include 4,511 factories that were historically the largest electricity customers, attorney Cliona Robb said on behalf of the group.
“It is the GS3 and GS4 rate classes that are being assigned a greater proportion of costs related to generation and transmission associated with meeting data center load,” she said.
VMA does not believe any drastic changes are needed to the way rates are handled now, Robb said. While its members are facing a greater share of costs from new load, that is just how the system works, and all customers benefit from building more generators and expanding the transmission system.
Demand from data centers is already driving most of the growth in demand, and eventually, it could get to the point where it threatens to make other large business less affordable in Virginia, which could have a bigger impact on the economy, Wilson Energy Economics Principal James Wilson said.
“We’ve heard that data centers represent economic development, but when you look on it on a per-megawatt basis, the amount of economic development from, say, an electrified manufacturing facility is much, much higher than a data center,” Wilson said.
Data centers can move to another part of the country easily, and that would have a much smaller economic impact than losing a manufacturing operation, he added.
“So, you might push the data centers around a little bit, but you probably wouldn’t want to do that to the manufacturing,” Wilson said.
So far, though, the way costs are allocated has worked, and the addition of new infrastructure has benefited the entire system, Google’s George said.
“We have never tied the provision of retail electric service to jobs-per-megawatt created,” George said. “And so again, it’s unclear what benefit that adds.”
