Data centers are a critical part of our digital future. In Virginia, the data center capital of the world, they provide financial benefits to a few counties, generate a surge of temporary jobs and sustain a smaller number of long-term jobs.
But the lure of local tax revenue, and temporary construction jobs, is clouding the true costs of data centers. In reality, the economic benefits are uneven. Under current rate structures, every Virginia ratepayer will suffer the economic consequences, but not every community will receive the financial and tax benefits.
Virginia’s state tax incentives for data centers are more than what is being collected in state tax revenue. State tax revenues for a five-year period is $1 billion, and the Data Center Retail Sales and Use Tax benefit is $1.5 billion. That’s a net loss of $500 million in state income by the state’s own estimates. Ratepayers across the state — especially in counties with no local data center tax benefit — are subsidizing energy through their utility bills to meet rapidly growing demand. Why are we paying for the infrastructure needs of Amazon, Google, Microsoft and Meta, the richest tech companies in the world?
The governor and some state legislators believe the local economic benefits of data centers should be the only criteria for further data center development. But this neglects the costs of data centers on all Virginians through higher electric bills, increased pollution, reduced water supply and increased land taken and converted for use as transmission lines, substations and power generation.
In the early days, the General Assembly took a hands-off approach. This approach worked when municipalities sited projects on lands planned for industrial use. Dominion Energy was able to deliver power through existing transmission infrastructure and provide sufficient power generation. Towns built schools and recreation centers with the newfound tax income and lower local taxes.
Where it went downhill was when the influx of data centers exceeded available industrial zoned land and power supply. Data center development spilled over into rezoned locations adjacent to residential developments, recreation areas, farmland, as well as national historic battlefields and other land that should never be industrialized.
And, Dominion Energy and data center operators hid impacts on the environment, additional power generation and transmission needed, and ultimately, the impact on ratepayers. Today, data centers continue to request nondisclosure agreements with municipalities in secret contracts for supply of electricity. This made it impossible to see the impact of hyperscale data centers. Currently, there are no reporting requirements to the state government for these contracts and nowhere for the public to view this information.
Without oversight, Dominion promised significantly more power than they have approved plans to produce or import from other sources. They’ve created an artificial “crisis by contract” that will strain the reliability of our electric grid and require the state to build expensive energy infrastructure. The cost of that infrastructure will be shouldered by Virginia ratepayers unless the General Assembly and State Corporation Commission work together to change the rate structure to make data centers pay the full cost.
Virginia voters are concerned about data center development as revealed in a poll by Christopher Newport University’s Wason Center for Civic Leadership: 67% said they support a ban on data centers within a mile of parks and historically significant sites and 77% support a law to require data centers to promote energy efficiency. Meanwhile, 57% opposed expanding tax incentives and 48% would like to see tax incentives abolished. As more voters grasp the cost implications, pressure on elected officials to take a responsible long-term view of this industry will only increase.
Without state-level oversight, transparent processes, ratepayer protection and incentives for efficiency, we will be saddled with a policy and legislative regime that serves the data center industry’s bottom line without considering longer term environmental and economic impacts on Virginians. We can no longer tolerate a myopic focus on the beneficial, but uneven, tax revenues and approve every data center that wants to come to town.
A small but growing bipartisan group of legislators introduced bills in the 2025 General Assembly session to require transparency around water and energy usage, additional state oversight on grid impact, honest independent appraisals to weigh the real costs, and smart mitigation of negative impacts. We applaud their leadership on this issue, but for the second year in a row, our lawmakers failed to take sufficient action on one of the most pressing issues for our state.
We can’t afford to wait any longer. Other states are taking action to protect their ratepayers, and Virginia must too. We can continue to be a good state for business — and set the standards for a smarter digital future for people and the planet.
Christopher Miller is president of the Piedmont Environmental Council. Contact Miller at cmiller@pecva.org.