Data centers have become a cornerstone of Virginia’s economy, playing a crucial role in powering various sectors and supporting statewide economic growth. These facilities are integral to the state’s innovation economy, keeping residents connected and facilitating efficient daily operations. A comprehensive study by the Virginia General Assembly’s Joint Legislative Audit and Review Commission (JLARC) provides a detailed analysis of the current status and future potential of Virginia’s data center industry. This report highlights the significant contributions of data centers, underscoring their importance in job creation, investment, and community support.
Economic Contributions of Data Centers
The JLARC report highlights the substantial economic contributions of the data center industry to Virginia. Annually, the industry supports 74,000 jobs, generates $5.5 billion in labor income, and contributes $9.1 billion to the state’s GDP. Fiscal year 2023 saw a statewide data center investment of $24 billion, underscoring the industry’s dominant role by accounting for 84% of all capital investments tracked by the Virginia Economic Development Partnership from 2022 to 2024. This level of investment showcases the data center sector as a critical driver of economic growth in Virginia.
Data centers provide high-quality, enduring operational and construction jobs due to their continual need for infrastructure development, such as fiber and HVAC installations. These jobs proliferate across various sectors, including restaurants, hotels, and small businesses, creating a robust local service ecosystem. This ripple effect extends beyond Northern Virginia, spurring economic development across regions like Fredericksburg, Richmond, Hampton Roads, and Southern Virginia, with potential expansions to Southwest Virginia and other areas. The wide-reaching impact of the data center industry emphasizes its role in fostering regional economic development and diversification.
Tax Revenue and Community Services
The sector also provides substantial tax revenue that funds vital community services like education, public safety, and transportation while requiring minimal public services to maintain their operations. The JLARC study reveals that in 2022 alone, data centers contributed $640 million in state taxes and $1 billion to local governments. Specific data from Northern Virginia indicates that data centers yield a local tax revenue of $13 for every $1 in public services required in Prince William County and $26 for every $1 in Loudoun County. These significant returns on investment benefit local communities immensely by supporting essential public services and infrastructure enhancement.
These significant tax contributions enable local governments to invest in essential services and infrastructure, thereby enhancing the quality of life for residents. The economic benefits of data centers are thus not confined to direct employment and investment but extend to broader community development and public service improvements. The ability to generate such substantial tax revenues while demanding minimal public services indicates data centers are a highly efficient and valuable asset for the state and local governments.
Leadership and Policy Effectiveness
JLARC validates Virginia’s well-established leadership and the effectiveness of its policies over the past 15 years in attracting and nurturing the data center industry. The report identifies several responsible development measures overseen by local, state, and federal agencies, enhancing policymakers’ ability to safeguard Virginians while minimizing environmental impacts. Virginia’s strategic approach has cultivated a thriving data center ecosystem, positioning the state as a leader in the sector and creating a model that balances economic development with environmental stewardship.
Virginia’s strategic approach to fostering the data center industry has positioned the state as a leader in this sector. The state’s policies have created a favorable environment for data center growth, attracting significant investments and driving economic development. This leadership is crucial for maintaining Virginia’s competitive edge in the global market. By implementing effective policies and responsible development practices, Virginia has demonstrated its commitment to sustainable growth and its ability to adapt to the evolving needs of the data center industry.
Power Generation and Infrastructure Needs
One major discussion point for state lawmakers highlighted by JLARC is the need for additional power generation and infrastructure to cater to the growing industry. The report acknowledges the data centers’ voluntary clean energy and carbon reduction commitments, suggesting that utilities and grid operators manage future energy demands while ensuring reliability and affordability. With rising electricity demand driven by new manufacturing onshoring, broadening electrification, hydrogen fuel production, and escalating data center services, substantial investments in energy infrastructure are crucial for sustaining the country’s economic progression. Addressing these infrastructure needs will be vital for ensuring the continued growth and success of Virginia’s data center industry.
The report reaffirms that data centers in Virginia are currently bearing the full cost of the electricity they consume. JLARC suggests that the State Corporation Commission (SCC) possesses the technical expertise to ensure the continued fair allocation of these costs as new energy generation and transmission frameworks are developed to support economic expansion. Ensuring a fair and sustainable energy system is essential for maintaining Virginia’s leadership in the data center industry and supporting the broader goals of economic growth and environmental responsibility.
Future Prospects and Strategic Growth
Data centers are now a fundamental part of Virginia’s economic framework, playing an essential role in powering various industries and bolstering economic growth across the state. These facilities are crucial to Virginia’s innovation-driven economy, ensuring residents stay connected and enabling smooth daily operations. A thorough study by the Virginia General Assembly’s Joint Legislative Audit and Review Commission (JLARC) offers an in-depth look at the current status and prospective future of Virginia’s data center sector. This report emphasizes the substantial contributions of data centers, highlighting their critical role in job creation, attracting investment, and supporting local communities. The analysis presented by JLARC paints a comprehensive picture of how indispensable data centers are, not just for technological advancement but also for economic stability and growth within Virginia. This underscores the multifaceted benefits they bring, making them key assets in the state’s economic landscape.
