Why Digital Infrastructure?

We are undeniably living in the age of digital data. Every click, every stream, every online transaction, every piece of information shared – it all generates data - and this data must reside somewhere.

It lives in servers that are rapidly becoming the bedrock of our global economy.

This age of digital data requires a rapid advancement of the global digital infrastructure ecosystem.

A robust and growing digital infrastructure ecosystem supports world-class communications and connections for existing and new industries and their ever increasing technology needs. Modern digital infrastructure includes data centers, local terrestrial fiber networks, internet exchanges and “meet me” rooms connecting these networks, trunk lines to other localities, subsea cables that connect other continents, satellite uplinks, secure facilities, and reliable resilient energy systems. Together, these assets form the backbone of industries that now define competitiveness – advanced manufacturing, logistics, healthcare, defense, research, and artificial intelligence.

A powerful digital infrastructure ecosystem supports the growth of high-paying IT/Tech jobs and ensures the industries of tomorrow will locate and expand in the I-64 Innovation Corridor. This will foster overall economic prosperity by increasing GDP, workforce, productivity per worker, and wages.

Listed below are the most frequently asked questions and answers related to the data center and digital infrastructure discussion in Virginia. (The responses are drawn from multiple studies and articles on Virginia’s data center industry, including the Joint Legislative Audit and Review Commission (JLARC) report on data centers released in December 2024):

• 1. What is a digital infrastructure ecosystem and how are data centers part of this ecosystem?

  Data centers are one component of a larger digital infrastructure ecosystem, which has a broader set of benefits, opportunities, and challenges. 

  Digital infrastructure ecosystems include local and robust terrestrial networks, internet exchange points and “meet me” rooms, network rings, intercity connections, subsea cables, satellite uplinks, reliable energy sources, and a diverse and growing number of data centers.

  It is the entire digital infrastructure ecosystem components working together that provide faster, most reliable internet services that support personal use of the internet (Microsoft Office, Google searches, Netflix, etc.) and innovative business practices (everything from cloud computing, big data analytics, Internet of Things, and e-commerce to AI-driven manufacturing).

  Here’s a description of each component:

  ·       Data Centers: Data centers are physical facilities that house servers, storage systems, and networking equipment to store, process, and manage vast amounts of data. Data centers enable the operation of applications and services like cloud computing, e-commerce, social media, and much more (think Microsoft Office, Google searches, and Netflix accounts).

  More than 550 data centers operate in Virginia, according to Data Center Map. https://www.datacentermap.com/usa/virginia/

  It should be noted that there is a big misconception that all data centers are very large warehouse-like buildings on campus-like settings. These large centers get all of the headlines. But the fact is data centers come in all shapes and sizes, including 5,000 to 25,000 square feet edge data centers that are closer to the end-users, supporting real-time data storage and transmission needs driven by the growth of Internet of Things and Artificial Intelligence.

  A growing number of these small data centers will be located closer to end-users for faster processing. Locations will include older office buildings, repurposed with advanced infrastructure to house servers and other critical components while maximizing space in urban and suburban environments. As a result, new data centers may be less visible, tucked into existing urban buildings rather than built as massive standalone campuses. 

  As the Internet of Things continues to grow, edge data centers are becoming essential for processing the vast amounts of data generated by connected devices. These facilities can process data at the edge of the network, ensuring that real-time data from devices like sensors, cameras, wearables, and robots in light manufacturing facilities is quickly analyzed and acted upon without relying on central servers in distant cities and less redundant backup terrestrial networks between distant regions.

  Beyond data centers, the digital infrastructure ecosystem includes several other key components:

  ·       Subsea Cables: These underwater cables connect continents, enabling the global transmission of data, linking data centers to international networks. There are more than 500 subsea cables connecting the World Wide Web today. About 99% of the world’s international data transmission happens over subsea cables. Many of these cables are reaching end of life, but the cables landing in Virginia Beach are relatively new, or being developed with modern architecture capabilities, delivering unparalleled bandwidth.

  In Virginia, three subsea cables come ashore in the Camp Pendleton area of Virginia Beach, connecting to Europe and South America, with a fourth subsea cable conduit available. Construction is underway in the Sandbridge area of Virginia Beach of four additional conduits. These new cables provide 400% increased bandwidth capabilities.

  ·       Local Terrestrial Networks: These are the land-based public and private fiber optic networks that interconnect data centers within cities and regions.

  ·       Network Rings: Some localities and regions have developed municipal government and private sector network rings to enhance connectivity and support the growing demand for digital infrastructure.

  These network rings are essentially high-speed, fiber-optic networks that connect multiple locations within a locality or region, creating a secure and efficient communication backbone. Network rings provide high speed connections for regional connectivity for public safety programs. Network rings provide significant cost avoidance models for government. These rings also can be leveraged by the private sector to efficiently provide broadband to the unserved areas.

  In Hampton Roads, five cities – Virginia Beach, Chesapeake, Portsmouth, Norfolk, and Suffolk – are building a 119-mile fiber ring (managed by the Southside Network Authority). An extension also is under construction to Isle of Wight and Southampton counties. Future phases include eventually connecting all 17 cities and counties in Hampton Roads including on the Peninsula.

  ·       Intercity Networks: These are fiber routes between cities and across countries that connect local city-oriented terrestrial networks. The main routes connect Metro Richmond and Hampton Roads to Ashburn in Northern Virginia and Atlanta.

  ·       Internet Exchange Points (IXPs): These are physical locations where internet service providers (ISPs) and data center operators exchange internet traffic, facilitating fast, direct, and efficient data transfers between networks.

  In the Richmond area, an Internet Exchange – operated by German-based DE-CIX – is located in three data centers. DE-CIX operates in six other U.S. markets and connects to nearly 60 IXs worldwide and 500-plus data centers.

  ·       Reliable Energy Sources: A strong digital infrastructure ecosystem requires large amounts of electricity to operate, especially to power the servers and maintain proper cooling systems. This energy often comes from local power grids and/or renewable sources, depending on the facility. New data centers have to coordinate with local power companies for energy supply, grid requirements, and redundancy.

  A robust and growing digital infrastructure ecosystem attracts the content providers such as Netflix, Google, and Microsoft to store residents’ and businesses’ digital content locally, giving everyone faster and more reliable access to things like Microsoft email accounts, Google searches, Netflix movies, etc.

  It’s important to appreciate that a digital infrastructure ecosystem can be viewed from both a state and regional level. The emerging expert perspectives on where the internet is evolving towards to fully leverage the power of AI are having ecosystems comprised of nearby localities with complementary digital assets. This is the model guiding the development of the Richmond-Hampton Roads megaregion in becoming a Global Internet Hub.

• 2. What are the economic and community benefits associated with robust digital infrastructure ecosystems?

  A robust and growing digital infrastructure ecosystem delivers significant economic and community benefits to Virginia and local communities.

  Growing our digital infrastructure ecosystems across Virginia also presents our best and fastest opportunity to catch up to other states, regions, and localities we compete against for business investment.

  From 2013 to 2023, Virginia lagged all Southeast states and almost all of the Southeast metro regions we compete against in terms of the rate of GDP growth and growth of IT/Tech workers. (Source: JobsEQ, a labor market research software that provides real-time data on job market trends, and the Bureau of Economic Analysis.)

  Virginia must accelerate its economic growth trajectory and do so in a way that ensures everyone benefits. Building robust and growing digital infrastructure ecosystems shared by the I-64 Innovation Corridor is one of the best and fastest ways to do so.

  The benefits in investing in Virginia’s digital infrastructure ecosystems include:

  Economic Benefits:

  ·       Boosting Economic Growth: Digital infrastructure significantly enhances productivity and efficiency. It enables businesses to operate more effectively, reach new markets, and reduce operational costs.

  Based on RVA757 Connects’ data, the top five mature U.S. digital infrastructure regions outperform the U.S. average in 10-year growth of GDP and productivity per worker.

  ·       Job Creation: The growth in the digital economy directly correlates with job creation, not only within the technology sector but also across ancillary services and industries that evolve to support and leverage digital advancements. For instance, the industry creates thousands of direct and indirect jobs in construction, operations, and maintenance. The JLARC report states that data centers generate approximately 74,000 jobs and $5.5 billion in labor income.

  The top five mature U.S. digital infrastructure regions outperform the U.S. average in 10-year job growth rate of IT/Tech workers, based on RVA757 Connects’ research.   

  ·       High-paying Salaries: A robust digital infrastructure ecosystem attracts IT/Tech workers. In the I-64 Innovation Corridor megaregion, the average salary of an IT/Tech worker is $114,100, according to JobsEQ, a labor market research software that provides real-time data on job market trends.

  ·       Economic Output: Data centers significantly contribute to Virginia’s economy, generating $9.1 billion in GDP annually, according to the JLARC report.

  ·       Capital Investment: Additionally, data centers have been instrumental in driving capital investment in Virginia. Between fiscal years 2022 and 2024, data centers accounted for 84% of all capital investment tracked by the Virginia Economic Development Partnership.

  ·       Industry Development: A robust, growing, and secure digital infrastructure enables the digital transformation of organizations across all industries. This includes enabling businesses and organizations to use the Cloud.

  ·       Workforce Development: Digital infrastructure jobs foster the growth of a skilled workforce in areas like technology, cybersecurity, and data management, contributing to long-term employment opportunities across the state.

  ·       Attracting High-Tech and Digital Industries: A strong digital ecosystem makes Virginia an attractive destination for tech companies, cloud providers, and startups. By offering the most reliable, high-speed (low latency) connectivity and access to data centers and internet exchange points, Virginia draws high-value businesses from sectors such as e-commerce, finance, and telecommunications, boosting its competitive edge in the global digital economy.

  ·       Improved Economic Diversification: A robust and growing digital infrastructure ecosystem supports a wide range of industries beyond traditional tech sectors, helping Virginia diversify its economy. By providing the backbone for industries like cloud computing, Artificial Intelligence, and the Internet of Things, a digital infrastructure ecosystem supports fosters innovation, attracts investment, and enhances the state’s role as a key player in the global digital landscape.

  ·       Increased Global Competitiveness and Connectivity via Subsea Cables: Robust digital infrastructure ecosystem that includes subsea cables positions Virginia as a critical hub in global data flows. Regions connected by subsea cables are better positioned to attract direct investment due to enhanced digital infrastructure. As businesses increasingly rely on digital platforms to connect with global markets, Virginia benefits from its central East Coast location, enhancing its attractiveness for international trade, business partnerships, and economic growth.
  ·       Support Our Growth Industries: Virginia’s most promising growth industries include transportation / logistics / supply chain, national security / cybersecurity, data and data analytics, pharmaceutical manufacturing and life sciences, and advanced manufacturing. Digital infrastructure is the backbone of all of these high-growth industries. Companies in these industries will be attracted to and thrive here with a robust and growing digital infrastructure. We need a strategy to connect these growth industries to our growing digital infrastructure ecosystem.

  ·       Attract Investment: High-quality digital infrastructure attracts both domestic and international investment. Investors are more likely to invest in regions where digital capabilities support vibrant technological and commercial activities. Data centers drive 84% of Virginia’s recent capital investments, while supporting workforce development and industry diversification, according to the Virginia Economic Development Partnership.

  ·       Enhance Competitiveness: Communities with advanced digital infrastructure compete on a global scale, attracting high-tech industries and skilled talents who seek dynamic and interconnected work environments.

   ·       Drive Innovation: Digital ecosystems facilitate innovation by providing the necessary tools and platforms for startups and established businesses to develop new products and services. This often leads to the development of new industries and expansion of existing ones.

  ·       Accelerate GDP Growth:  As Artificial Intelligence shifts from “learning” to “doing,” it will unlock enormous GDP growth for regions and localities and across almost every industry. According to 2024 PwC’s Global Artificial Intelligence Study, AI will significantly boost GDP for local economies. AI works best with LOCAL robust terrestrial digital networks supported by an abundance of LOCAL edge data centers. States and regions that offer this kind of state-of-the art digital infrastructure ecosystem will have one more advantage in growing their GDP.
  
  Community Benefits:

  ·       Improved Quality of Life: Digital infrastructure ecosystem can improve the quality of life for residents by providing access to e-government services, healthcare, education, and enhancing public safety through smarter and more responsive city services.

  ·       Community Sustainability: A growing digital infrastructure ecosystem can lead to more sustainable urban and regional development by enabling smart city technologies that optimize resource use and reduce waste.

  ·      Underserved Communities: A growing digital infrastructure ecosystem can support greater broadband access to underserved communities. In addition, the growing digital infrastructure industry leaders are contributing resources to address issues like affordable housing.

• 3. How can Virginia further its digital infrastructure ecosystems to accelerate economic growth?

  Investments in data centers, which are one part of digital infrastructure ecosystems, represented 84% of the total capital investment across all economic development projects announced by the Virginia Economic Development Partnership (VEDP) between FY22 and FY24. Virginia can further leverage this success by:

  ·       Focusing on digital infrastructure ecosystems, not data centers, as THE topic of discussion: Recognize that data centers are part of larger digital infrastructure ecosystems that are responsible for economic growth today and present enormous potential for our economic success for years to come.

  ·       Empowering localities, not restricting them on a statewide level: As people call for more restrictions on data centers, encourage localities to use their pre-existing local powers to manage their own digital infrastructure issues.

  ·       Addressing the Sunset Law: Extend or eliminate the 2035 Sunset Law on state sales and use tax exemptions for data centers. The sunset deadline creates uncertainty, which could divert critical investment to other states that offer greater stability and incentives. Resist measures tied to any extension that would reduce Virginia’s competitiveness in attracting digital infrastructure investment.

• 4. How important is it that Virginia prioritizes investment in digital infrastructure ecosystems?

  ·       Virginia has lagged all Southeast states and most Southeastern metropolitan areas (MSAs) in terms of population, employment, and GDP growth rate from 2013 to 2023.

  ·       Investing in digital infrastructure ecosystems is the most effective way to catch up. Technology workers are more productive in driving GDP per worker.

  ·       Artificial Intelligence is expected to unlock the economic value across most companies and industries, as well as significantly boost the GDP of states and cities.

  ·       The key hinges on the availability of advanced local digital infrastructure – specifically, modern data centers and robust terrestrial networks capable of supporting real-time AI integration in homes, workplaces, factories, vehicles, and entire communities. Continued investment in the development of Virginia’s regional digital infrastructure ecosystems is essential to seizing this transformative opportunity and accelerating economic growth.

• 5. How can Virginia further leverage its digital infrastructure ecosystems to serve all Virginians?

  Robust digital infrastructure ecosystems should benefit every resident, not just tech companies or high-growth industries. By intentionally reinvesting data center-related income into community needs – such as broadband expansion, computer literacy programs, and affordable housing – localities can ensure that everyone participates in the digital economy. 

  The realities of poverty and limited digital access mean that thousands of Virginians still lack affordable computers, high-speed internet, and basic digital literacy. According to Pew Research, four in 10 people in poverty lack a computer, limiting access to online services like health information. Factors such as low education, stress, language barriers, and limited digital literacy further hinder health literacy, making it harder to make informed decisions about their well-being.

  There also are other growing challenges for the underserved. Virginia’s steady poverty rate of 13% masks a deeper issue: population growth. By 2030, this growth is expected to add 50,000 more people living in poverty. Affordable housing remains one of the biggest challenges for this underserved population, with a statewide shortage of 300,000 affordable rental homes. Many residents are forced to spend over 30% of their income on housing, and 24% of renters earn less than 30% of the area median income, highlighting the urgent need for solutions.

  Examples of how digital infrastructure ecosystem can make a difference:

  ·       Affordable Housing Initiatives: Henrico County is leading the way in demonstrating the role and power of digital infrastructure players who can be a major partner in community building. Henrico is now directing the next $60 million in local data center taxes toward addressing affordable housing to establish the Henrico Affordable Housing Trust. This program ensures that the benefits of Henrico’s data center boom are reinvested into the community, addressing the rising demand for affordable housing as the region grows.

  ·       Other grants: Data centers in Virginia have made significant contributions to local communities and nonprofits. For instance, Meta, the parent company of Facebook which has a data center in Henrico County, has donated more than $4 million to community nonprofit organizations, schools, and educational programs in the Richmond region during the last couple of years. Meta also is the lead corporate sponsor in bringing PCs for People to the Richmond area and Hampton Roads region.
  
  ·       PCs for People: RVA757 Connects’ plan is to make the Richmond area and Hampton Roads not only the world’s next Global Internet Hub but also the world’s first truly equitable digital society. To this end, we led the recruitment of PCs for People, a national nonprofit that is expanding into the I-64 Innovation Corridor megaregion, to provide refurbished computers, low-cost internet access, and training to underserved communities. The program is expected to start in the summer 2025.

  PCs for People:

  • Collects outdated computers donated by companies and organizations (at no charge).

  • Refurbishes the computers and adds the latest software.

  • Provides the renewed computers to underserved residents for no cost (desktop system) to up to $150 for a late model laptop computer.

  • Provides free computer use competency skills training.

  • Provides free ongoing computer tech support.

  • Provides low-cost internet connections to the underserved (about $15/month).

• 6. How do Virginia’s digital infrastructure ecosystems compare to other U.S. and international locations?

  Virginia’s digital infrastructure ecosystem is considered among the most robust and competitive in the U.S. and globally, particularly in areas such as data centers, fiber-optic networks, and connectivity. Here’s how it compares to other U.S. and international locations:

  ·       Data Center Hub (U.S. and Global): Two of Virginia’s most robust digital infrastructure ecosystems are globally competitive – Northern Virginia and Richmond-Hampton Roads megaregion, giving Virginia a growing reputation for digital leadership.

  
  Northern Virginia is often referred to as the largest data center market in the U.S. and one of the largest globally, particularly in terms of data center capacity and connectivity. Northern Virginia makes up 15% of the world’s data center capacity The Ashburn area in Loudoun County, known as the “Data Center Alley,”  has attracted some of the biggest names in the industry, including Amazon Web Services (AWS), Google, and Microsoft.

  But the Southern part of Virginia, including the I-64 Innovation Corridor, represents 1.5% of the global data center capacity. This part of Virginia is becoming more and more a location for data centers. In fact, tens of billions of dollars in data center investment are planned or underway.

  Tax Incentives: Virginia led the nation with the introduction of competitive tax incentives for data centers. Since that time, 34 states have exemption for data centers or do not have this type of sales tax at all (four states). All states bordering Virginia provide a sales tax exemption to data centers. Ensuring our tax environment continues to remain competitive will support Virginia’s regulatory stability, established framework, and robust infrastructure continuing to ensure it’s a top destination for data center and digital infrastructure investment.

  Virginia's sales and use tax exemption for data centers currently sunsets in 2035. Without an extension, operational costs for data centers would increase due to the continuous need to replace expensive equipment. This potentially affects future investments. Any measures tied to an extension would make Virginia less competitive.

  ·       Connectivity and Fiber-Optic Networks: Virginia leads in fiber-optic infrastructure, with major interconnection points in Ashburn, Reston, Henrico, and Virginia Beach, serving as a vital hub for global data flows. Its extensive terrestrial networks and subsea cable fibers connecting in Virginia Beach to Europe and Latin America, offering unmatched low-latency connections or faster responses.

  While 87% of Virginians have access to high-speed internet, about 392,000 locations, primarily in rural areas, remain unserved. With $1.48 billion in federal funding, Virginia is actively working toward universal broadband internet access, reinforcing its status as one of the most connected states in the U.S.

  ·       Business Climate: Virginia’s regulatory stability, established framework, and robust infrastructure make it a top destination for data center and digital infrastructure investment.

  ·       Skilled Workforce and Education: Virginia also has a compelling story when it comes to strong IT/Tech-related workforce training and education, across the entire talent pipeline.

  A great example in the K-12 setting is a program called the Great Opportunities in Technology and Engineering Careers, also known as GO TEC, which builds strategic talent pipelines in career connection labs using hands-on learning in high-demand career pathways such as precision machining, welding, IT and cybersecurity, robotics and automation, mechatronics, and advanced materials. Another program is CodeVA, which brings computer science education to Virginia’s K-12 schools and develops programs to train teachers.

  Complementing K-12 is the Virginia Community College System, which offers associate degrees and certifications in data center operations and related fields, ensuring a pipeline of skilled talent to meet industry needs.,

  Virginia’s universities, including Virginia Tech, George Mason, Virginia Commonwealth University, William & Mary, and Old Dominion University, offer strong STEM programs. Some universities, such as ODU and W&M, even have data science institutes to support this growing industry. With competitive wages and workforce development programs, Virginia attracts tech companies seeking specialized skills, all while avoiding the high living costs of places like Silicon Valley and London.

  From an employer's perspective, organizations in Virginia like Jefferson Lab and NASA are renowned for their in-house expertise in IT/Tech-related workforce development and training.

• 7. What are localities and regions across Virginia doing today to build their local digital infrastructure ecosystems and data center development?

  Virginia cities, counties, and even entire regions are being very intentional in building their digital infrastructure and courting data center investment.

  Southwest Virginia counties: Key counties in the region, such as Wise, Buchanan, Tazewell, and Dickenson, have partnered to create a unified approach to attracting digital infrastructure investments. They have packaged their collective strengths, including lower energy costs, available land, and infrastructure development. The region benefits from access to the Appalachian Power grid, which allows for relatively affordable electricity.

  In addition, these counties offer tax incentives and financial assistance programs designed to attract digital infrastructure investments. These incentives include sales tax exemptions on equipment, property tax abatements, and grants for infrastructure development, making it financially attractive for data center companies to establish operations in the region.

  Wise County: Wise County has been one of the most notable areas exploring the potential of old caves and underground spaces for data center development. 

  Richmond area and Hampton Roads: The most organized regional approach is being advanced by RVA757 Connects for the I-64 Innovation Corridor. This megaregion combines the digital assets of the Richmond area and Hampton Roads in becoming a Global Internet Hub.

  Three subsea cables that land in Virginia Beach connect the U.S. to Europe and South America. More subsea cables are on the way. Additionally, major data centers – operated by companies like Meta and QTS in Henrico – bolster the region's capacity to handle vast amounts of data. The growth of fiber optic networks, network rings, network access points (Internet Exchanges), and data centers are now transforming the region into a major international connection point that will attract more businesses, enhance internet connectivity, and support economic growth across the megaregion.

  RVA757 Connects created a strategic plan to make this happen. A copy can be found here.  This plan was developed by the Global Internet Hub Steering Committee, a 60-person-plus taskforce supported by a grant from GO Virginia, with matching funds from Henrico County, Virginia Beach, the Hampton Roads Alliance, Dominion Energy, Dragonfli Group, and Old Dominion University. The Steering Committee included representatives from localities, chambers, economic development agencies, workforce development agencies, businesses, higher education, digital infrastructure owners, and four branches of the military.

  According to international consultants that helped with the development of this strategic plan, this was the first time they have ever heard of two nearby regions working together on a digital infrastructure strategy. The growing awareness of the Richmond area and Hampton Roads has seen a profound ramp-up in data center and digital infrastructure investments across the megaregion. In 2024, billions of new dollars in data center investment were announced or in the planning stages.

• 8. What will digital infrastructure ecosystems look like and deliver in the future when Artificial Intelligence is pervasive?

  What kind of digital infrastructure ecosystems are needed when Artificial Intelligence is running everything?

  The future of digital infrastructure ecosystems in an AI-driven world will be defined by LOCAL data centers close to end users and high-speed LOCAL terrestrial networks enabling instant transmission seamlessly integrated into global networks to support AI-enabled automation in localities, offices, factories, homes, and cars.

  This fusion of local strength and global reach will define the future of winning communities of tomorrow. Experts are now calling this GlobaLOCALization, a new industry imperative.

  Global internet architects at the Atlantic Convergence Conference held in Portugal in October 2024 predict that, in the future, it will take nearby cities working together with complementary digital assets to effectively deliver GlobaLOCALization.

  This structure or hub and spoke orientation of nearby cities working together creates several infrastructure zones, all talking to and supporting each other while being and acting extremely LOCAL as possible, but at the same time, being part of a global ecosystem with access to subsea cables. These hyper-connected, local data center-rich hubs (“regional clusters”) provide low latency (hyper-fast) LOCAL data flows and nearby redundancy that’s needed for the AI-enabled automation of offices, factories, robots, and autonomous vehicles.  

  This is precisely the plan for the Richmond-Hampton Roads Global Internet Hub strategy. By combining and viewing the digital assets of the Richmond area and Hampton Roads as one digital market, we are operating the future of the internet today.

• 9. What can be done about energy-related issues?

  There are growing world-wide concerns about the energy demands of data centers and their associated digital ecosystems. This is a legitimate concern here in Virginia.

  Today, a significant percentage of the energy generated by Dominion Energy supports data centers. The data center industry’s rapid expansion is expected to double this energy demand within the next decade, posing challenges for energy infrastructure development and grid reliability.

  Both the Commonwealth of Virginia and Dominion Energy remain committed to meeting the state’s 2050 environmental sustainability goals.  However, given the rapid energy growth, the state must pursue an “all in” generation approach and not rely solely on renewable generation. Renewables sources alone will not maintain grid reliability. The load profile and energy consumption of data centers conflict with intermittent generation sources. Without significant investment in all generation resources and promoting energy efficiency, grid reliability will be an issue.

  The good news: Virginia is at the forefront of expanding green generation technologies. Several examples that are already under way include the world’s first grid-scale commercial fusion power plant planned for Chesterfield County; Small Modular Reactors being considered at Dominion’s North Anna Power Station; and the largest offshore wind project in the United States off the shore of Virginia Beach.

  To address the growing energy needs in the Commonwealth, the JLARC Report recommends pursuing all viable generation sources, not just renewables. This approach balances the needs for clean energy, growing demand, and maintaining grid reliability.

  Data centers present an energy challenge, but, according to VEDP, they currently account for 84% of capital investment in Virginia. As long as we rely on the internet and smartphones, the demand for data centers will continue to grow. So, too, will the amount of energy needed to power data centers.

  The optimal way to formulate a comprehensive energy plan to support digital infrastructure is to review all power generation sources to ensure available capacity and system reliability. This is the process currently being used by the Virginia State Corporation Commission, energy companies, and electric cooperatives.

• 10. What is the issue around the state’s sales and use tax exemption for data centers?

  Data center and digital infrastructure ecosystem growth is a competitive necessity. Many other regions across the U.S. and internationally continue to actively court data centers due to their importance in supporting technological growth and providing essential infrastructure.

  Since the late 2000s, one of the primary incentives to attract data centers has been the exemption of state sales and use taxes on data center equipment.

  Today, 34 states have a sales tax exemption for data centers while four states do not have this type of sales tax at all. All states bordering Virginia provide a sales tax exemption to data centers.

  In 2008, Virginia became the seventh state to adopt a sales tax exemption. (The initial exemption applied to very few localities and is no longer in effect, but a statewide exemption was adopted in 2010.) 

  In 2035, Virginia’s state-level sales and use tax exemption for data centers is set to expire. This potential change in tax policy will require data centers to pay state taxes on equipment, impacting their cost structure and possibly influencing their future investments in the Commonwealth. Data center investors are closely following this topic as 10 years is a typical capital recovery time horizon.

  The tax issue is a big deal as a data center must replace or upgrade digital equipment – such as servers, networking gear, storage systems, and cooling units – on a continuous basis. On average, a data center may spend millions of dollars annually on new equipment. Taxes on new equipment represent a big ongoing expense. Other industries are not burdened with the continuous need to replace or upgrade equipment.

  Any measures tied to an extension would make Virginia less competitive.

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