When it comes to the rapidly growing data center market in the United States, it gets no bigger than Northern Virginia.
Its more than 300 data centers carry one-third of the planet’s online traffic and comprise the largest market in the world. Northern Virginia easily eclipses the capacity of other states and far exceeds its international competition in Hong Kong, Singapore, London and Frankfurt.
Not surprisingly given our insatiable appetite for life online, demand figures to get much bigger with the expansive use of artificial intelligence. That also means a sharp increase in the demand for energy and greater stresses on infrastructure. In Virginia, questions are being raised about the possibility and cost of meeting those new demands, and whether generous tax deals data centers enjoy will be worth it in the long run.
Although almost quaint by comparison, Nevada is experiencing its own rip-roaring data center boom with elaborate plans for expansion in the coming years. The competition for the Silver State market is increasing, too. With its tax advantages, inviting business community and close proximity to tech-rich California, it’s easy to understand why.
But Nevada can learn a few things from Northern Virginia, where the state’s General Assembly will meet in 2025. A recently released draft report commissioned by its Joint Legislative Audit and Review Commission (JLARC) analyzes the pertinent issues surrounding the rapid growth of the industry and raises questions that should be reverberating in our own state.
An excerpt: “An independent model of the energy grid commissioned by the JLARC staff found that a substantial amount of new power generation and transmission infrastructure will be needed in Virginia to meet unconstrained energy demand or even half of unconstrained demand. Building enough infrastructure to meet unconstrained energy demand will be very difficult to achieve with or without meeting the Virginia Clean Energy Economy Act requirements.”
While the data center industry has an estimated annual impact on the economy of $9.1 billion, energy demands are expected to triple in the region by 2040. That, of course, means consumers are likely to pay more for the power they rely on, in part to offset the necessary expansion of the infrastructure of the grid. Residents and activists have raised their concerns for the past year, according to published reports.
Setting aside the sunny spin, another finding of the report bears repeating: Most of the employment benefits of data centers come during construction, not during their operation:
“Data centers provide positive benefits to Virginia’s economy mostly because of the industry’s substantial capital investment. The primary benefit comes from the initial construction of data centers. Most construction spending likely remains in the state economy because much of it goes to Virginia-based businesses providing construction materials and services.”
As you might have guessed, Republican Gov. Glenn Youngkin of Virginia is a big supporter of that economic growth, and less fretful about the potential long-range concerns. Whether Republican or Democrat, governors know growth is good whether you’re in Virginia or Nevada. In Youngkin’s case, he makes it clear the economic upside will be lost if the Legislature decides to “bend a knee to a green energy agenda and give away Virginia’s leadership position.”
In noting the serious challenge of meeting even half of the energy demands it believes it will face, the report goes on to make the need for a broad range of power-generating choices – not all of them on the environmental community’s nice list. That includes not only the continued use of coal and natural gas under the political umbrella known as “all of the above,” but the increased need to build new power plants at a cost of billions of dollars to even attempt to meet the needs of the expanding data center industry.
The use of offshore wind farms and nuclear technology is also part of the discussion. Without those enormous infrastructure increases necessitated by the growth of data centers, the report notes, power demands in the coming years would remain essentially flat in the state.
Nevada, of course, has its own concerns from its growing data center complexes in Las Vegas and the Reno area. The prospects for the use of solar are greater here, but the availability of water for systems that use millions of gallons to cool their computer banks is another matter.
These areas are among those that might generate a compelling conversation during our own upcoming session of the Nevada Legislature.
