Can Virginia Balance Data Center Growth with Environmental Concerns?

February 4, 2025
Can Virginia Balance Data Center Growth with Environmental Concerns?

A bipartisan group of Virginia lawmakers is advocating for implementing stricter regulations on data centers, given their substantial impact on the state’s resources. These facilities, while beneficial in terms of job creation and considerable tax revenue during both construction and operation, have presented significant challenges for Virginia due to their extensive consumption of electricity and water, as well as the large amounts of land they occupy. The coalition, spearheaded by state Sen. Russet Perry, intends to create a structured legal framework to address these issues. Their approach focuses on four main pillars: protecting families and businesses, enhancing transparency, managing resources responsibly, and incentivizing efficiency.

Protecting Families and Businesses

The first pillar, protecting families and businesses, addresses the need for fairness in utility rates across diverse types of customers, which has become a key concern. At present, the rate structures differ significantly for homeowners, renters, and large energy users like data centers. Homeowners and small businesses typically pay a standard residential rate, whereas larger businesses and facilities have different rate schedules, which some argue allow them to pay less than their fair share. This disparity in utility rates has raised concerns about the equity and fairness of the system, particularly for smaller consumers.

In response to these concerns, Del. Michelle Lopes Maldonado has sponsored a bill mandating the State Corporation Commission (SCC) to formally reconsider and potentially adjust rates to ensure equity. This legislative effort aims to create a more balanced and fair utility rate structure that does not disproportionately burden smaller consumers while allowing larger facilities to benefit from lower rates. By addressing these imbalances, lawmakers hope to protect families and small businesses from the financial strain caused by the current rate structures.

Enhancing Transparency

The second pillar, enhancing transparency, is achieved through HB1601, sponsored by Del. Joshua Thomas. This bill aims to require high-energy-use facilities, like data centers, to include noise assessments in their local permit applications. Additionally, it permits localities to impose their own reporting requirements on impacts to water, agricultural land, historic sites, and forests. This effort is intended to provide greater visibility into the environmental and community effects of these facilities, allowing for more informed decision-making at the local level.

This legislative effort has garnered diverse support from various sectors, including agriculture, historic resources, forestry interests, Dominion Energy, and environmental advocates. However, it has faced opposition from Virginia’s electric cooperatives, who fear operational challenges, and the Virginia Economic Development Partnership (VEDP), which worries about potential delays in development and the message it might send to other high-energy industries. Additionally, the Virginia Department of Energy has expressed concerns about imposing universal rules based on the conditions in Northern Virginia, where most data centers are located. Despite these concerns, proponents argue that increasing transparency is essential for ensuring that the growth of data centers does not come at the expense of local communities and the environment.

Responsible Resource Management

The third pillar, responsible resource management, by establishing statewide review processes, addresses Virginia’s infrastructure and environmental challenges due to data center expansion. HB2027 proposes comprehensive evaluations of grid reliability, cost impacts, and environmental compliance to effectively manage industry growth. As the rapid expansion of data centers strains Virginia’s decarbonization plans, Dominion Energy has warned that increased demand will necessitate further fossil fuel generation despite the utility’s ambitious solar and wind power buildout plans.

The legislative measure aims to ensure that the state’s electrical grid is not overwhelmed and aligns with a Joint Legislative Audit and Review Commission (JLARC) report’s findings that meeting projected demand growth will be incredibly challenging. By implementing these measures, lawmakers hope to create a more sustainable and resilient energy infrastructure for the state, one that can support the growth of the data center industry while also protecting Virginia’s natural resources and environment.

Incentivizing Efficiency

The fourth pillar, incentivizing efficiency, is vital for ensuring that data centers operate as efficiently as possible, given their vast power consumption. HB2578, sponsored by Del. Rip Sullivan, proposes tying tax exemptions for data centers to their adherence to performance standards that minimize energy use. The bill also mandates the phasing out of large diesel generators used as power backups and encourages data centers to find ways to reuse generated waste heat. The goal is to reduce the environmental impact of these facilities while still supporting their growth and economic benefits.

By incentivizing efficiency, lawmakers aim to ensure that the industry operates in a more sustainable manner. This approach not only helps reduce the overall energy consumption of data centers but also encourages the adoption of innovative technologies and practices that can further enhance their efficiency. In doing so, Virginia hopes to strike a balance between supporting the growth of this important industry and minimizing its impact on the environment and local communities.

Governor’s Stance and Local Decision-Making

Governor Glenn Youngkin’s stance on these measures remains unclear. However, he has expressed support for local decision-making in this domain. In his State of the Commonwealth address, Youngkin emphasized Virginia’s commitment to remaining a leading data center hub while ensuring that local communities retain the autonomy to make decisions suited to their contexts. This nuanced position highlights the importance of balancing state-level regulations with local needs and priorities.

In parallel to the coalition’s efforts, state Sen. Danica Roem has voiced her cautious stance on data centers. She argues that, if allowed to exist, they should be confined to industrial zones away from residential areas, schools, and parks. Roem emphasized the importance of not compromising natural landscapes for data center development, highlighting the need for careful consideration of the environmental and community impacts of these facilities. Her stance underscores the importance of local input and decision-making in determining the appropriate locations for data centers, ensuring that their growth does not come at the expense of local quality of life and natural resources.

Balancing Economic Benefits and Environmental Sustainability

A bipartisan group of Virginia legislators is pushing for stricter regulations on data centers, given their substantial impact on the state’s resources. While these facilities are advantageous due to job creation and significant tax revenue during their construction and operation phases, they pose considerable challenges for Virginia. Their extensive consumption of electricity and water, along with the large swathes of land they occupy, necessitates this push for better regulations. State Sen. Russet Perry is leading this coalition, aiming to establish a comprehensive legal framework to tackle these issues effectively. The plan revolves around four main pillars: protecting families and businesses, improving transparency, managing resources responsibly, and promoting efficiency. These measures are intended to ensure that while data centers continue to benefit the state economically, they also operate in a way that is sustainable and mindful of Virginia’s environmental and community resources.

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