Energy demand will outstrip supply in Virginia as data centers proliferate (2025)

Virginia faces a power demand problem as data centers continue populating the commonwealth.

At least one regional leader, with more than 30 years experience in electrical engineering, warns of a worst-case scenario that few of Virginia’s electric customers have ever seen.

Rolling blackouts are very likely in the region in the next few years, said Gary Wood, president and CEO of Central Virginia Electric Cooperative. His co-op, with help from Dominion Energy, will deliver power to a recently approved Appomattox data center.

Wood and his co-op are excited about the Appomattox project, which he says can benefit an area of the state that needs new local investment. His company does not have an official position on the energy demand issues, but he remains concerned about the growing load required of utilities from data centers, AI, electric vehicles and other sources, he said.

A December report generated for the Virginia General Assembly predicts that power demand in the commonwealth could double in a decade and rise by up to 183% by 2040.

“I have said that on a personal basis, I believe we will have rotating blackouts before this gets resolved,” Wood said.

Virginia Del. David Reid, D-Loudoun County, disagrees on the certainty of blackouts. He believes that a combination of legislative actions in years to come, plus technological innovations, will dampen the possibility.

“There’s an old adage that … necessity is the mother of invention,” said Reid, whose district is home to half of the approximately 200 data centers in Loudoun County.

Data centers are warehouse-like buildings that are often the size of a chain department store, but meant to house computers and networking equipment that store and transmit data. The commonwealth, Northern Virginia in particular, hosts 35% of all the data centers on the planet. Data centers, which typically run nonstop, require more power for computer and server heating and cooling than most other commercial structures.

Their expansion beyond Northern Virginia’s “Data Center Alley” and into Southside and Southwest Virginia echoes their move onto points across the American map. With each new center come dozens, even hundreds, of megawatt requirements. Even if authorities disagree on whether major service losses could result, most agree that the potential is there.

An ‘elevated risk’ of power shortfalls

Rolling blackouts, also called rotating outages, are controlled events that usually occur during extreme weather, when power suppliers turn off electricity to a group of customers for about a half-hour, then restore it and move the blackout to another group, in order to preserve supply.

Wood has told his co-op members that he expects to see such events in the next three to five years within PJM, the regional power grid that includes Dominion Energy and Appalachian Power, along with other electric utilities in all or parts of 13 states.

[Disclosure: Dominion is one of our donors, but donors have no say in news decisions; see our policy.]

Rolling blackouts in Texas made national news in 2021, but Virginians haven’t experienced them in recent memory. They nearly happened in 2022, though, during a late December event, Wood said.

Since then, demand has increased while electric companies have closed older power plants, he said.

Twenty generation facilities, including two of Dominion’s in Virginia, were closed between May 2023 and this April, according to PJM data. Twenty more across PJM are scheduled to close between this May and the end of 2028, including two Appalachian Power units in Buchanan County.

PJM received Federal Energy Regulatory Commission approval in February to fast-track reviews of up to 50 new power generation projects, including what is likely to be multiple natural gas facilities, according to Datacenterdynamics.com. It was unclear where they will be built and how long construction could take, assuming they’re approved and when.

Multiple studies estimate that demand will far outstrip supply in coming years, and they point to data centers as a significant factor in the equation.

An international regulatory authority report released late last year says that Virginia — along with more than half of North America — faces an elevated to high risk of electricity supply shortfall. The North American Electric Reliability Corp.’s study, published in December, looked at the continent’s long-term power situation.

The report categorizes Virginia and other states in the PJM at “elevated risk,” in which “extreme weather conditions are likely to cause a shortfall in area reserves.”

“PJM is experiencing large growth in data centers that are in turn driving higher demand forecasts,” the report states, noting that Loudoun County hasthe largest concentration of such facilities in the world. Regional power suppliers throughout the continent report the same.

Their size and the speed with which data centers can be built and connected to the grid create challenges in forecasting demand and planning for system behavior, as well.

The report’s risk summary for PJM stated that new projects aren’t keeping up with either the growth of demand or the closing of older facilities. Winters have replaced summers as the higher-risk periods for supply; areas at elevated risk have the resources now but may face challenges in extreme weather.

A study that the commonwealth’s Joint Legislative Audit and Review Commission conducted says that future consumption would require more than 30,000 gigawatt-hours per month, driven largely by data centers. One gigawatt, by the way, is 1 billion watts — equal to nearly two million solar panels or 103 offshore wind turbines, according to the Department of Energy.

By contrast, Virginia would use 15% more energy than it does now if there were no new demand from data centers, the JLARC study says. The supply is unlikely to keep up, according to the study. At best, meeting demand will be “difficult to achieve,” the study says.

Wood believes that the root of the problem is a state law requiring public utilities to connect new customers that need service, but no rule or regulation in the PJM market requires electric companies to build new generation facilities.

Reid, on the other hand, pointed to a section of the JLARC report that gives him confidence.

Despite the obligation for electric companies to serve any customer in their service territories, the report says, they are not required to provide it immediately upon request. “Their foremost responsibility is to ensure the reliability of the power grid before adding any new, large customers like data centers,” it reads.

“The way that I read that and put it into kind-of layman’s terms is that utilities do have an obligation to serve new customers, but not at the risk of existing customers,” Reid said.

Factoring in the realities of operating within a regional grid complicates the matter, Wood said.

It’s easy to calculate the capacity oflocal lines and transformers, but that doesn’t account for calculations within a multistate generation pool, he said.

“If a Virginia utility denies a data center request, will its neighbor in Pennsylvania, who is in the same regional grid, also deny it? And the utilities in Ohio, and Maryland, and so on? The question of generation capacity is regional, not local,” Wood wrote in an email exchange.

In fact, the JLARC report’s suggested legislative actions include clarifying “that electric utilities have the authority to delay, but not deny, service to customers when the addition of customer load cannot be supported.” This year’s General Assembly session did not address that issue.

Regional utility plans call for ‘innovative’ solutions

Dominion Energy, which has not commented on the JLARC report, stands behind its long-term “plan to meet growing power demand,” spokesman Aaron Ruby said in an email exchange.

According to information on its website, Dominion continues growing itssolar portfolio, with a plan to provide up to 16,100 megawatts in the state by 2035. The company, which supplies power to many data centers in Northern Virginia, is developing wind turbines off the Virginia and North Carolina coasts. Battery storage for wind and solar is part of the company’s clean-energy plan, as well.

Dominion’s Virginia offshore wind project is more than 50% complete and on track for completion in late 2025, Ruby wrote.

Dominion, which has two nuclear power stations in Virginia, also has taken early steps toward the possible construction of a small modular reactor at its North Anna plant, in Louisa County.

Such a reactor, smaller and therefore cheaper than a full-sized nuclear reactor, would also produce less energy. An SMR can deliver a maximum 300 megawatts, while a conventional nuclear plant can deliver more than 700 megawatts, according to the International Atomic Energy Agency.

For an idea of scale, the Appomattox facility that Central Virginia Electric Co-op will power will have a peak load of 300 megawatts. The average data center has a peak power need of between 20 and 50 megawatts, according to multiple sources.

Appalachian Power is not yet in the data center world, though that could change soon. The Virginia General Assembly added $7.5 million to the general fund this year for Pulaski County, which would use the money to improve a site that might lure a data center. Appalachian services Pulaski County and much of Southwest Virginia.

Wythe County, also in Appalachian territory, has been seeking such a facility for years, with talks increasing in recent months, said David Manley, executive director of the Joint Industrial Development Authority of Wythe County. And a project in the works in Wise County would use 65,000 acres of former coal mine land for data centers and other tech facilities.

Appalachian spokeswoman Ashley Workman said that the company is “looking at innovative ways to meet future demand,” including a small modular reactor the company plans to bring to Campbell County.

“Appalachian Power has been and will continue to work toward meeting energy demands needed by our customers,” she wrote in an email. “As this load materializes, we will continue to work with the State Corporation Commission and other major stakeholders to ensure we meet all necessary requirements to bring a diverse energy portfolio to Virginia while working to keep costs down for customers.”

A fast-approaching regional deficit

The PJM system as a whole could experience a capacity shortage as soon as next year, according to a letter that its board of managers Chairman Mark Takahashi addressed to stakeholders in December.

Atop his list of trends tightening the system’s supply-demand balance was the proliferation of high-demand data centers. Older facilities such as coal-fired power plants are closing fast as the industry shifts to cleaner fuels, but new sources are slow to come online due to “industry forces” that include siting, permitting and supply chain constraints.

The Federal Energy Regulatory Commission has taken some actions to ease the strain, he said. FERC in February approved PJM’s requests to keep some older power plants running past their intended retirement dates “to maintain system reliability,” to connect oncoming projects faster, and to streamline pairing renewable resources such as wind and solar with battery storage.

“The suite of proposed filings … addresses a generational change in our industry that requires both thought leadership and action,” Takahashi wrote, adding that it still will not “resolve the challenge.”

In Richmond, JLARC based its December report on research from multiple analysts and consultants over the preceding year. It incorporated more than 300 interviews with data center firms, utilities, local governments, state agencies and residents.

Its report acknowledged positive economic benefits of data centers from construction and tax revenues. But building enough electric infrastructure to meet unconstrained energy demand “will be very difficult to achieve, with or without meeting the Virginia Clean Economy Act requirements.”

The act requires Dominion and Appalachian to reduce their reliance on coal and natural gas — and achieve carbon-free energy portfolios — by 2045 and 2050, respectively. Electric cooperatives are not covered by the 2020 law, but co-ops including Wood’s Central Virginia Electric Cooperative rely on electricity from both of the large utilities.

“New solar facilities, wind generation, natural gas plants, and increased transmission capacity would all be required to meet unconstrained demand, and the number of projects needed would be very difficult to achieve,” the report states.

“For example, new solar facilities would have to be added at twice the annual rate they were added in 2024, and the amount of new wind generation needed would exceed the potential capabilities of all offshore wind sites that have so far been secured for future development. Large natural gas plants would also need to be added.”

Meanwhile, utility-scale solar and wind projects have been rejected in multiple commonwealth locations.

Potential legislative and technological solutions

Wood sees an unsustainable mismatch between the requirement to serve but no requirement to generate.

He pointed to Georgia, a state that never moved away from the regulated industry model of old. Georgia is among the states at the least risk of power disruption, according to the federal study. In that state, utilities must show how they will ensure adequate power generation. In return, they are assured that their plants will be paid for within electric rates charged to consumers, removing risk from the builders, he said.

However, the recently completed expansion at Georgia Power’s Alvin W. Vogtle Electric Generating Plant came online for $35 billion, which was more than twice its original budget, he said. The nuclear facility also was completed seven years later than scheduled.

“Full regulation has its issues, and so does full market dependence,” he said.

Instead, a hybrid regime could ensure adequate resources to avoid the rolling blackouts that Texas faced in February 2021, which resulted in hundreds of deaths in extreme weather.

In the short term, all energy sources should remain on the table, he said.

“We can significantly slow the pace of taking fossil fuel plants off-line,” Wood said. “We can work to determine the best siting for solar and wind, and we can invest to expedite the advancement of battery technology. We also need to pursue geothermal, small modular nuclear, hydrogen and other technologies for generation.”

Reid, the delegate from Loudoun County, said that the General Assembly is likely to more fully address JLARC recommendations in future sessions (see sidebar for a list of energy-related recommendations in the report).

One of his own bills this session, HB 1821, was inspired by a recommendation from the JLARC report. It would have allowed large energy customers to claim credits for solar, wind and battery purchases through the state’s accelerated renewable buyers program. Currently, that portion of the Virginia Clean Economy Act only provides credits for producers of electricity, not users, Reid said.

The legislature passed the bill, and Gov. Glenn Youngkin signed it, but with amendments that Reid said would add nuclear power to that mix. The Democratic-controlled legislature preferred to address nuclear later, so it did not approve the governor’s additions, Reid said. Youngkin has until early May to sign or veto the bill without the additional language.

Reid expects future innovations will emerge that will mitigate the coming power imbalance.

SMRs, fusion and geothermal are candidates among emerging energy technologies, he said. Solar — rooftop or parking lot options might be more publicly popular — wind and added battery storage for those sources are among established tech that is likely to factor in.

Some innovation might even come from data centers themselves, he said.

“When you talk to a data center company, either their first or second top-line expense is energy,” he said.

They spend a lot of time trying to make their buildings, the computers inside them and the air conditioning more efficient. If they can do that, they generate more revenue for owners and shareholders, Reid said.

Companies are experimenting with alternative electrical generation capacity such as hydrogen and natural gas fuel cells on site, removing the need for transmission lines, he said. They’re working with more efficient air conditioning methods.

“They’re driven by the bottom line to be as efficient as they possibly can,” he said.

The JLARC report notes that data centers can improve efficiency with newer and more efficient computer chips, with energy management standards and with building standards for new construction. Still, that is likely to have “only a marginal impact on demand,” the report reads.

Microsoft has six data center sites in Mecklenburg County on more than 3,000 acres, with more under construction. Company representatives did not respond to emails asking about energy efficiency efforts.

State Sen. Danica Roem, D-Prince William County, represents an area with a growing number of data centers, and applications piling up for more. She has been introducing bills and teaming with others to advance legislation regarding data centers since her days as a House of Delegates member.

Among the data center bills that Roem introduced in the Senate this year, only one made it to the governor’s desk, and it was vetoed. Roem’s SB 1047, as originally written, would have required the major utilities to create a demand response program for any customer using 25 megawatts or more in a year. Such a program would have reduced those customers’ consumption during emergencies on the power grid and mitigated possible power deficits, Roem said.

By the time it came to Youngkin’s desk, the bill had been rewritten and would simply direct the Virginia Department of Energy to evaluate a possible demand response program and make recommendations. Youngkin vetoed it, writing in his explanation that the State Corporation Commission already can evaluate such a program’s effectiveness, and that utilities already have demand response programs for large customers “who can opt in to participate if their industry has potential operational flexibility.”

Roem said that her original bill was taken from a JLARC recommendation: “The General Assembly may wish to consider amending the Code of Virginia to require that utilities establish a demand response program for large data center customers and to require that these customers participate in the program.”

The report noted that data center companies in Virginia do not participate in demand response programs, and their representatives say they don’t have enough flexibility to decrease energy use during “peak load events” because power use is driven by customer demand for computing activity.

“From a business perspective, data center companies have strong incentives to keep facilities fully operational to meet their customer and end-user computing needs, and these typically outweigh financial incentives offered by voluntary utility demand response programs.”

Roem said that Youngkin has taken the industry’s side.

“The governor’s veto is at best disingenuous, at best it is merely parroting what the data center industry wants, which is to keep doing everything that it’s doing right now without any change,” she said.

Roem said she and other legislators will return next year to try again. Bills might include clarifying whether electric utilities can delay service to customers when their energy demands outstrip supplies, she said.

Roem said she will remain hopeful that Virginia won’t face the specter of rolling blackouts or worse.

“I think we’re going to get to that Winston Churchill moment of ‘Americans will always do the right thing after they’ve exhausted every other possibility,’” she said. “I think that’s where we’re heading toward, basically, dealing with the energy crisis that we’re about to face right now.”

Much remains to be determined at the state, federal and business levels, but Wood, the electric co-op executive, calls for strong leadership to meet the issue.

“Data centers are growing because there’s a huge demand and a lot of positive impacts,” he said. “I want to be careful not to come across in any way as saying we don’t need data centers. We absolutely need to figure out how to manage the load and the continued need that society has for additional computing power and technology.

“There’s a demand for that. It provides a lot of benefits, so it’s important for us to find the solution.”

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