DIGITAL INSIGHTS: Meet Virginia's Energy Governor, Abigail Spanberger

The commonwealth's first female governor faces a slew of challenges, but none may be greater and more urgent than ensuring Virginia has the energy necessary to remain the leader in data centers.

By Martin Davis
EDITOR-IN-CHIEF
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Abigail Spanberger is all smiles post-election, but the challenges for ensuring Virginia has the energy to retain its position as the world’s leader in infrastructure for artificial intelligence and our connected world is quickly taking center stage and may prove to be the defining policy work of her administration.

Digital Insights is a weekly feature usually appearing on Thursdays that explores the role of data centers in our region. These columns will focus on four areas: tracking the development of data centers in our area, exploring projected and actual tax revenue trends, explaining what data centers are and how they affect our daily lives, and reporting on research and emerging trends in the industry. These columns are made possible, in part, by a grant from Stack Infrastructure.

Following her runaway victory on Nov. 4, Gov.-Elect Abigail Spanberger appeared on “Face the Nation,” where she was asked about rising energy costs in Virginia and their connection to artificial intelligence and data centers. Her response touched two fronts in this challenge — the current reality, and the future challenge.

What we have seen in the research so far is that the increased [energy] costs are not driven by the increase in data centers. There are some bad energy policies in some of our neighboring states that have driven up prices particularly in Southwest Virginia. But looking to the future, we have to be clear-eyed about the fact that we will have an energy crisis headed into the future.

Spanberger’s comment that AI data centers aren’t driving up everyday Virginians’ energy cost is likely drawn from the 2024 Joint Legislative Audit & Review Commission study on data centers (p. vi) that noted the current rate structure is appropriately allocating costs and data centers are paying their fair share.

However, that report continues, due to projected load requirements:

[a] large amount of new generation and transmission will need to be built that would not otherwise be built, creating fixed costs that utilities will need to recover. It will be difficult to supply enough energy to keep pace with growing data center demand, so energy prices are likely to increase for all customers. Finally, if utilities are more reliant on importing power, they may not always be able to secure lower-cost power and will be more susceptible to spikes in energy market prices.

A key policy that would ensure large-energy users will continue to bear their share of the costs in the future is currently before the State Corporation Commission. This policy idea was first posited in the JLARC study.

If approved, this new rate category would, according to the JLARC report, establish “a separate data center customer class, changing cost allocations, and adjusting utility rates more frequently,” which “could help insulate non-data center customers from statewide cost increases.”

The SCC will also decide on Dominion Energy’s plan to potentially require high energy-use customers to sign a 14-year contract requiring they pay for proposed energy costs even if their projects aren’t built or end up using less energy than anticipated.

Spanberger’s ability to deal with the looming energy challenge, therefore, will in part be decided before she takes the oath of office on January 17.

While these policies before the SCC would help ensure that large energy-use facilities continue to shoulder their fair share, they do not address the challenge of generation.

Generation, Generation, Generation

As of 2023, Virginia is the largest importer of energy in United States, a position that had long been held by California.

Gov. Glenn Youngkin has called for the increased generation of energy, primarily through the deployment of Small Modular Reactors (SMRs). Spanberger is following up on this plan, but is also pushing for other clean-energy options — solar and wind — that Youngkin has sometimes killed arguing the costs to build and deploy them are too high.

While SMRs are promising, they are not without significant challenges. For openers, they remained largely untried in a business environment. There are currently no SMRs operating in the U.S., for example, and just two globally.

Further, Virginia Business, citing John Parsons of the Center for Energy and Environmental Policy Research at the Massachusetts Institute of Technology, noted that “because the reactors are smaller, they are less costly to build, but supply power at a higher price because they don’t benefit from economies of scale.” Finally, they aren’t likely to come online in time to meet pressing demand.

Projected rollouts of SMRs have been pushed back on several occasions, and are now not expected to come online until the mid-2030s.

Virginia is going to need substantially more energy before then.

Speaking last week at a Chamber of Commerce Regionalism Matters event in Spotsylvania, Rappahannock Electric Cooperative CEO John Hewa delivered a reality-check on the generation challenge before Virginia.

“Virginia needs to double its capacity by 2040 according to PJM forecasts,” he said, “either in the Commonwealth, or in a neighboring state.”

He estimates that for every $10 billion in data center investment, Virginia will need $3.5 - $10.5 billion in generation investment. And creating that investment here in Virginia would be desirable.

“Virginia is increasingly leaning on neighboring states to solve our energy needs. Meeting our demand though generation infrastructure in Virginia would provide stronger energy security, reduce risks, promote affordability and bring more jobs and investment into the Commonwealth,” Hewa said. “The fix for Virginia’s energy challenge, is in fact, more investment that supports the state and our local economies.”

Hewa posited four things the commonwealth needs to do immediately to become an energy leader.

• Accelerate the regulatory processes

• Accelerate the permitting processes

• Invoke energy storage and generation

• Immediately authorize 10,000MW of dispatchable baseload generation, sited in Virginia

There are projects in the pipeline.

A 1.5-gigawatt natural gas plant is now being discussed in Fluvanna County. A fast-tracked project by PJM — a regional transmission organizations which serves 13 states (including Virginia) and D.C. and coordinates the buying and selling of energy — it would represent the type of significant generation boost that will be required to meet future demand.

Natural gas is not mentioned in Spanberger’s energy plan issued during her campaign, but it is likely to play a significant role in ramping up Virginia’s energy generation. Her approach to deploying natural gas will be watched closely by energy analysts.

The Energy Governor?

Spanberger enters the Governor’s Mansion at a time of multiple challenges. She has been vocal about the policies coming out of the White House that are directly damaging Virginia’s workers and economy, as well as the need to significantly step up the commonwealth’s public education system, among other challenges.

But as people count down the days to her inauguration, how Spanberger works to ensure the viability of the state’s data center industry is quickly taking center stage.

Virginia is the world leader in the infrastructure that powers artificial intelligence and our connected world. Whether the state has the energy to retain, and grow, its role rests squarely on Spanberger’s shoulders over the next four years.

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