Virginia’s data center boom tests clean energy law

Known as the data center capital of the world, Virginia offers a crucial test case for electric utilities: Can they meet power demand from the explosion of AI while keeping bills affordable and slashing carbon emissions?

Many experts fear that Dominion Energy, Virginia’s largest utility, is failing that test.

In July, the company won approval from state regulators for its plan to construct a raft of new fossil-fueled plants over the next 15 years — despite a Virginia law that discourages such plants and requires them to phase out completely by 2045.

Now, Dominion is asking the same regulators for permission to build the first of those facilities: a 944-megawatt ​“peaker” complex that would operate only when demand is at its highest. The utility says the four-unit ​“reliability center” in Chesterfield County, just outside Richmond, is the best way to meet a surge in electricity needs and warrants an exception to the state’s decarbonization law.

But in a flurry of paper filings over the last month, clean energy advocates and industry groups disagreed — acknowledging a growing demand for power but maintaining that Dominion ignored a range of alternatives in order to justify the new gas complex. Even the nonpartisan expert staff for the regulatory body, the State Corporation Commission, criticized Dominion’s rationale for the permit.

“No one is denying that there is some load growth, and we will need new resources,” Peter Anderson, energy policy director for advocacy group Appalachian Voices, said in a statement. ​“But there is no justification for backtracking on clean energy progress and saddling communities with new polluting plants.”

“Unacceptable threats to reliability”?

Virginia has fast become ground zero for data centers — immense buildings that house computers and related hardware that power AI chatbots and other software that’s now part of everyday life. The state is already home to hundreds of these facilities, especially outside of Washington, D.C., and along Interstate 95.

Just last week, Google announced plans for another data center in Virginia, and many more are on the way, Dominion says, helping to spur a 5% annual rise in peak electricity use over the next 15 years. And while some critics question the specifics, they accept the overall trajectory of growth.

But the demand surge is testing the limits of the 2020 Virginia Clean Economy Act. The law forces Dominion to convert to carbon-free power in the next two decades and prevents the company from building new fossil-fuel plants until it meets official energy-efficiency targets. The company must also prove that fossil-fuel generation is more cost-effective than nonpolluting means of meeting demand.

Dominion nodded to the law in its March application for the reliability center but also noted that the statute ​“does not require that the Commission take any action which, in its determination, ​‘threatens the reliability or security of electric service to the utility’s customers.’”

The new gas complex is the only cost-effective solution, according to the utility. Without it, the company said in its filing, ​“unacceptable threats to reliability” will ensue.

“They biased the entire process”

But in written testimony filed with regulators in recent weeks, multiple experts rejected Dominion’s conclusions on both reliability and cost-effectiveness.

Many said a ​“cold snap analysis,” which Dominion relied on to show that the gas complex would be crucial during extreme cold weather, was unpersuasive. Dominion could easily avoid power shortages by using fully charged batteries and suspending exports to Duke Energy customers in North Carolina, consultants for Appalachian Voices and other nonprofits testified. By correcting these and other assumptions, ​“all identified energy violations are resolvable without constructing Chesterfield,” Ryan Deyoe, a power markets specialist at analytics firm Telos Energy, wrote on behalf of the groups.

Critics also took aim at a study by The Brattle Group, which modeled a reliability scenario with and without Dominion’s proposed gas project. ​“The finding that the system is less reliable when a resource is removed and not replaced with anything is not helpful or meaningful,” Devi Glick, a senior principal at Synapse Energy Economics, testified on behalf of the Sierra Club.

To address reliability, Dominion should try to comply with a mandate of reducing electricity sales 5% by 2028 compared to 2019 levels, Glick wrote. Instead, the company plans to reduce sales by less than 3%. ​“By omitting incremental energy efficiency from its modeling,” she said, ​“Dominion is ignoring the reliability impacts of increased investment in energy efficiency.”

A consultant for industry group Advanced Energy United, Maria Roumpani, testified that the company also ignored other clean solutions in its application, including battery storage, grid-enhancing technologies, and virtual power plants. Plus, she pointed to the potential for load flexibility for large customers, a still-nascent but promising approach whereby behemoths like Google agree to use less electricity during the handful of hours a year when the grid is under the greatest stress.

Detractors poked holes in Dominion’s economic analysis, arguing it unnecessarily restricted these alternatives. For the Sierra Club, Glick developed a carbon-free portfolio that would cost about the same as the gas complex, without the downsides of pollution and the volatile price of fossil fuels that would be borne by customers.

Shawn Kelly, Virginia-based regulatory director for Advanced Energy United, says the flaws in Dominion’s application stem from the utility’s desire to build the Chesterfield complex no matter what. The company, he said in his testimony, had a ​“predetermined outcome to build a gas plant and then to support their decision, they biased the entire process so that they could select their proposal.”

“A difficult position”

The State Corporation Commission’s expert staff, which recently filed its own testimony in the case, also took a dim view of Dominion’s methodologies.

The staff — whose opinion is highly valued by commissioners — questioned the cold snap analysis, as well as the Brattle study. ​“Neither of the analyses presented by the Company show that [the Chesterfield Energy Reliability Center] is unquestionably the best choice of generation unit needed to meet a projected resource deficiency,” staff analyst Steven Smith said in his testimony.

The company’s economic study was also underwhelming, he wrote. ​“It is clear the construction of new natural gas resources is not a dramatically positive impact to jobs or the economy within the Commonwealth specifically based on the Company’s economic impact analysis.”

Staff lamented Dominion’s failure to develop other, potentially cleaner energy resources in the years leading up to its permit application for the Chesterfield complex.

“The limited options available to the Company for alternative dispatchable resources, the long timeline required to build them, and the Company’s timing and decisions have placed the Commission in a difficult position relative to adjudicating this [permit] application,” Smith testified.

And yet, despite all those misgivings, staff did not oppose approval of the Chesterfield project, suggesting Dominion had left regulators little choice in the face of rising electricity demand.

Delaying construction of the plant or considering new alternatives, Smith argued, ​“has the potential to leave the Company substantially resource deficient and reliant on the currently volatile spot market,” in which the utility can buy power from elsewhere in the region.

Still, the staff’s opinion is not the final word. Dominion’s written responses to critics were due this week. Public comments are being accepted until Sept. 16, and an in-person expert witness hearing in the quasi-judicial proceeding is scheduled for late September. There’s no timeline for regulators to rule.

“The decision is in the commission’s hands after they hear the rest of the evidence,” Kelly told Canary Media. ​“But it is really important to home in on what the staff pointed out as flaws, including: They’re not convinced that this Chesterfield solution is the best solution. That’s scary when you’re talking about spending billions of dollars of ratepayer money.”