Utilities are used to facing opposition from environmental and consumer groups when they present a new rate-case proposal to their state regulators. However, Dominion Energy in Virginia has been challenged from an unexpected corner as its 2018 integrated resource plan (IRP) is under review—a group of its largest customers. Ten major tech companies have signed a letter objecting to Dominion’s proposals to meet the new demand created by ever-expanding data centers in Northern Virginia with gas turbines and a new pipeline to support them.
The companies that signed the May 10 letter agree their electricity use is going to grow. As much as 70 percent of global internet traffic is estimated to travel through the region’s data centers every day; if the cloud had a physical address, this would be it. One data center campus, the Dupont Fabros facility in Ashburn, Va., added 28 megawatts of new demand in 2017 alone. What’s known as “Dulles Tech Corridor,” because of the proximity to Dulles International Airport, also has been dubbed the “Silicon Valley of the East.”
Over the last decade, sustainability has become a significant issue for the tech industry, and many companies have initiatives underway to source solar and wind energy to offset their data centers’ significant energy use. Often, that has meant financing solar and wind projects in other parts of the country and crediting that production against their own demand. In Northern Virginia, however, the IRP review process offers a unique opportunity to influence energy decisions in their own backyard, and this letter’s signatories have banded together to do just that.
Dominion’s IRP is a review of how the utility proposes to spend ratepayer money over the next 15 years. In it, the utility argues expanding data center operations will require new generation capacity to meet potential demand peaks—a point the letter doesn’t dispute. However, Dominion suggests the best way to meet this need would be through major investments in natural gas infrastructure. The pipeline the utility proposes already has come under attack from consumer advocacy and environmental groups, but the fact that those this pipeline is planned to serve have joined the fray is significant to the tech companies. In their public letter, Apple, Amazon, Microsoft, Salesforce and others argue against what they called “expensive fossil fuel projects.” Instead, the group advocates for buying more wind and solar energy, integrating energy storage into the grid and incentivizing efficiency improvements.
This is an important bottom-line dispute for Dominion. With residential and commercial demand flat to falling throughout the state, the Northern Virginia data centers represent a rare load-growth opportunity for the company. Dominion is a regulated utility, meaning it owns most of its own generation facilities, and it would own much of the pipeline it’s proposing to serve the new gas turbine. The utility’s profits are driven by the annual rate of return it earns on such investments, so the proposed pipeline—now expected to cost $7–$7.5 billion—along with the generators, could become a new source of profits.
Ceres, a Boston-based nonprofit working with investors and corporations to build economic arguments for sustainable development and operations, organized the group. Alli Gold Roberts, Ceres’ senior state policy manager, said the letter is a response to Dominion’s stated need over the last three years for new rate-based infrastructure to meet growing data center demand.
“This has been an ongoing effort for us. In late 2016, 18 companies got together in a call to action,” she said. As a group, the companies realized they had leverage to argue for a utility generation portfolio that could help them meet their own corporate sustainability goals. Additionally, they see financial disadvantages in the utility’s push for infrastructure investments that could mean higher ratepayer bills for decades.
“They’re pushing Dominion, saying ‘if new load growth is going to be from data centers, then you’ll take our needs into account,’” Gold Roberts said.
Virginia is a regulated-utility state and data center owners don’t have the option to contract with third-party wind or solar developers to meet their sustainability goals, because utilities in such states have monopolies over power sales. Green tariffs in some regulated states allow individual companies to buy the output of specific wind or solar plants through a long-term power-purchase agreement. But the terms of these rates are customized to each corporate buyer, so they don’t necessarily foster the kind of broader renewable adoption Ceres’ member companies are seeking.
“Companies want to have an impact in the places where they have employees and operations,” Gold Roberts said, adding that the letter’s signers, and the broader tech industry, are increasingly seeing financial and environmental benefits in their turn toward renewable generation—and not just in Northern Virginia. “They want to save money, and they want to do it in a way that helps the communities where they live and work.”
About The Author
ROSS has covered building and energy technologies and electric-utility business issues for more than 25 years. Contact him at [email protected].