New data centers in Northern Virginia, currently the primary source of new energy demand in the mid-Atlantic, could put significant strain on the region’s capacity reserves and transmission grid
Austin, TX(AURORA ENERGY RESEARCH)—Data centers have become one of the primary sources of new electricity demand across the United States and in PJM, the largest power market in the world covering 65 million customers in the Mid-Atlantic region. The PJM market operator expects 11 GW of new data centers by 2030 in northern Virginia alone, representing more than 40% of the state’s current peak demand. According to a new report from Aurora Energy Research, a leading global provider of power market analytics, a high-growth case could drive additions of up to 15 GW (nameplate) of natural gas capacity in PJM by 2030, compared to a conservative scenario.
Since 2014, northern Virginia has seen a boom in data centers, with capacity growing 30% annually to reach more than 4 GW today—ten times a decade ago and the largest concentration worldwide. A 25-square-mile area in Loudoun County known as “Data Center Alley”, 20 miles west of Washington D.C., now contains nearly 200 data centers, with 100 more in the vicinity.
These data centers, serving global internet traffic, demand significant amounts of electricity, and that demand is rising fast. While regional electricity demand has decreased over the last 15 years, PJM predicts data centers alone to increase peak power demand in Dominion—the utility serving most of Virginia—by 50% over the next 6 years, with data center capacity growing by 11 GW through 2030 and another 10 GW through 2040. That equates to adding more than the entire state of New Jersey’s power demand to Virginia within a 15-year timespan.
This fast, concentrated load growth will present a major challenge to ensure sufficient generation and transmission capacity. “Adding the 10-15 GW of firm generation capacity needed to supply these data centers and keep the lights on in Virginia will not be easy. It can take 3-4 years for the transmission organization just to greenlight a new generator, and market prices are currently too low for developers to build the kind of capacity required,” said Zachary Edelen, PJM Research Lead at Aurora Energy Research. “Plus, this comes on top of multiple other strains on the electricity system, including conventional generator retirements, increasing reliance on weather-dependent resources, an aging transmission grid, and expected load growth from other sources, such as EVs.”
Future growth is unlikely to be supplied by carbon-free generation alone, barring significant changes in incentives and regulations to decarbonize the grid. Although renewable capacity stimulated by state incentives grows by more than 40 GW in all of Aurora’s scenarios, transmission organizations like PJM typically limit the extent to which intermittent resources are credited for system reliability. This—and data centers’ consistently high daily demand profile—will require dispatchable generation such as natural gas or battery storage. “As a result, our analyses consistently show that data centers bolster the business case for natural gas generators, meaning state and federal governments will need to do more if they want to decarbonize,” said Edelen.
Data centers’ load growth and the associated need for new generation capacity could strongly impact power prices, according to Aurora’s report. Aurora’s modeling shows that large demand additions can lead to a step-change in wholesale power prices, demonstrated by a 30% increase in Dominion’s 2035 power prices if the region adds 50% more demand than expected. This dynamic suggests an effective “upper bound” to regional data center additions before consumers are severely affected by rising energy costs.
As for capacity prices, utilities and consumers across the Mid-Atlantic could see their fixed costs for reliability rise over 400% by the late 2020s if this demand in Virginia materializes. “But a more likely outcome is for new data centers to start locating elsewhere, following where electricity is cheaper,” said Edelen.
Despite PJM’s predictions, data center additions to northern Virginia could slow as other regions become relatively more attractive. Artificial Intelligence training may not require the low latency that Virginia has historically provided. Other states, including Texas, Arizona, and North Carolina, are competing with Virginia’s tax breaks with incentives of their own. And local opposition, increasing power prices, and potential power deliverability issues could make Virginia go out of favor or incentivize data centers to provide their own behind-the-meter generation.
Slower data center growth could reduce the need for new generators in the Mid-Atlantic. However, even in a conservative case PJM will need to replace its retiring coal generators, and Aurora’s study indicates that natural gas will likely fill a significant portion of that gap. Although electricity from natural gas is 2-3 times less carbon-intensive than coal, this would still mean another 30+ year lock- in of fossil fuel generation.
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Notes to editors
Aurora’s report provides an independent, fact-based, and quantitative analysis to key business leaders, stakeholders, and policymakers active in PJM and US energy markets. It provides multiple forecast scenarios for data center load in northern Virginia, based on historical growth trends in the various drivers of data center load and uses Aurora’s in-house power market models to analyze this load growth’s impacts on the electricity system.
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