Data Center Panel Voices Concerns for Environment, Ratepayers

Apr 8

Mark Zuckerberg famously coined the Silicon Valley mantra, “move fast and break things.” What happens when the “thing” being broken is a state’s water supply? Or utility pricing? These are the questions that should plague lawmakers as Virginia solidifies its role as the nation’s data center capital.

Data centers store, process, and share massive amounts of data. Although the concept of a data center is not new, the rise of cloud computing and the recent explosion of AI technology have driven a purportedly commensurate boom in data center construction. Virginia rose to the fore as the premier host for data centers due to a combination of factors: the Commonwealth’s preexisting internet infrastructure, its proximity to DC, affordable energy pricing, and a tax incentive specifically aimed at data centers.

Beginning as early as the 1960s, DC was a hub for cutting-edge technological research, as the home to the Defense Advanced Research Projects Agency and the birthplace of ARPANET, a precursor to the modern Internet. [1] DC’s technology industry eventually spread to Northern Virginia, where America Online, more commonly known as AOL, set up shop. [2] AOL became the nation’s largest Internet provider by 2000, worth $125 billion. [3] The Internet bubble then burst, leaving AOL with vestiges of its grandiose valuations and leaving Virginia with a more permanent token of the Internet explosion: fiber-optic cables. To this day, 70% of IP traffic is either created in or passes through Loudon County and Virginia’s fiber-optic infrastructure priming it for an influx of data centers. [4]

The rise of cloud computing fueled the acceleration of data center growth in the early 2000s. [5] In 2009, Apple chose to build a $1 billion data center in Maiden, North Carolina. [6] The next year, Virginia introduced new tax incentives targeting data center development. [7] As it stands today, the incentive exempts certain corporations from state sales and use tax on computer hardware, which resulted in at least $1.6 billion in savings for tech companies in 2025. [8]

Virginia is now home to hundreds of data centers, with many more in the pipeline. [9] They are proliferating throughout the Commonwealth, extending past Northern Virginia down into the Richmond area and west toward the Blue Ridge Mountains. [10] AI has only fed the data center development frenzy since the early 2020s. AI data centers are larger and more energy-intensive than cloud computing data centers, and thus may bring with them new, additional challenges to the Commonwealth and those localities particularly affected by their construction. [11]

As a timely response to growing questions about the impact of data centers on the Commonwealth, the Virginia Environmental Law Journal hosted a data center symposium on Friday, April 3. The symposium featured three panels, the first of which I covered for the Law Weekly. The panel, titled “The Environmental Impacts of Data Centers,” included panelists Piedmont Environmental Council President Chris Miller, Southern Environmental Law Center associate attorney Tyler Demetriou, and Virginia Mercury columnist Ivy Main.

Jack Magner moderated the panel, beginning with the question thousands of Virginians have likely been asking themselves of late: What environmental impacts of data centers should we be aware of? Mr. Miller kicked off the discussion by flagging what would emerge as a major theme—unprecedented energy consumption. Existing data center proposals would triple energy demand, which the existing utility infrastructure cannot support. Mr. Miller critiqued the Commonwealth’s “piecemeal” approach to permitting utility expansion proposals, pointing out that the Commonwealth appears to be trying to avoid aggregate impact analysis. Ms. Main added that increased burdens on the energy infrastructure could cause rates to increase.

The data centers themselves also pose environmental concerns, as Mr. Demetriou explained that they make money by being online 24/7. In the event of a power outage, the data centers switch to backup diesel generators. Commentators disagree about the potential effects of these generators. The Virginia General Assembly’s Joint Audit and Legislative Review Commission produced a report in 2024, finding that the generators are a “relatively small contributor to regional air pollution” in Northern Virginia. [12] A University of California, Riverside study, on the other hand, found that these generators cause 200-600 times more air pollution than gas-fired power plants. [13]

In addition to air pollution, data centers risk straining and ultimately imperiling water resources. Although Virginia is considered a wet state, Mr. Miller pointed out that the water needed to cool data centers could be in the hundreds of millions of gallons per day. Mr. Miller lamented the “recalcitrance” of the state agencies that ought to be forecasting and addressing the impacts of data center development. The onus of forecasting appears to have fallen heavily on nonprofits. Ms. Main explained that the tech companies driving data center development themselves may not be overly concerned about forecasting because they are simply trying to lock up as much land as possible.

As the panel progressed, it became clear that data centers pose multifaceted environmental risks. The centers themselves sometimes emit constant noise, have immense water demands to cool their systems, and risk air pollution from their backup generators. Perhaps even more pernicious, though, are the impacts on the Commonwealth’s public utility system. Prior to the AI boom, Virginia’s projected energy growth was negligible because increased energy efficiency offset population growth. [14] The advent of data center development has caused energy demand to skyrocket, leading to concerns that energy rates will rise for individual ratepayers. Even where existing data centers cover the costs of their own consumption, the spike in interest in data centers caused the panelists to express concern over the speculative nature of energy demand forecasts. Tech companies may take steps to build data centers in multiple locations, but ultimately choose a single location to put down roots. Where utility companies expand their infrastructure in anticipation of a data center that never comes to fruition, costs of that expansion may be passed on to ratepayers.

The types of energy used to meet ongoing demand also remain an open question. Dominion claims that it cannot meet rising energy demand without keeping coal on the grid and expanding natural gas facilities, the latter of which stands to impact the localities in which such facilities are built. [15] Because utility companies must undergo a state permitting process to expand their infrastructure, the Commonwealth has opportunities to mitigate environmental fallout from utility expansion. Unlike localities, which deal with zoning permitting for data centers themselves but not the utility deals, the State Corporation Commission stands to closely regulate and even block proposed expansions. The panelists repeatedly voiced their concerns that the Commission was failing to account for the adverse impacts data centers might have on local communities.

Data centers are not without their value. Commentators estimate that the initial construction of a data center infuses a municipality with cash in the forms of labor- and property-related revenue. In Loudon County, data center tax revenue constitutes over one-third of the county’s tax base. [16] The economic benefits after initial construction are murky, particularly if measured against environmental impacts. Mr. Miller posed the question, “are we serving an industry or are we serving the public good?” As the AI explosion reverberates throughout the nation and our Commonwealth, let Mr. Miller’s question echo along with it, and perhaps spur some action, as well.

Emily Becker ’27

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