News flash: There’s something happening in Northern Virginia that we in Southwest and Southside ought to be paying attention to.
Namely, localities there are starting to cool on the notion of data centers as economic development, which raises the question of whether there’s an opening for localities in Southwest and Southside that would love to have data centers – and have whacked their taxes so low to get them that it’s almost embarrassing, except for the fact that we still haven’t seen a rush of data centers southward.
There are lots of reasons for this that I’ll get to shortly, but first let’s deal with what’s happening in Northern Virginia, which has the largest concentration of data centers anywhere in the world.
Actually, maybe the first thing I should do is explain what a data center is. It’s a big warehouse of computers that help make the internet “go.” That’s a highly simplified version, but that will do for our purposes today.
Some more simplified facts:
- The amount of data on the internet is doubling about every two or so years. Here’s how to measure the size of all that: A single character takes up about a byte. A two-page Word document of simply text is about 20 kilobytes, so it would take 50 of them to make up 1 megabyte. A single mp3 – a song, for instance – is about 3 megabytes. A zettabyte is 1,000,000,000,000,000,000,000 – one sextillion – bytes, so, well, let’s just say a lot. In 2010, there was an estimated 2 zettabytes of data on the internet. By 2019 there were 41 zettabytes. By 2021, 79 zettabytes. This year it’s projected to go up to 97. There is no end in sight. We’re going to need a lot more data centers.
- So far, that has mostly meant Northern Virginia. The region accounts for 48% of the “primary” market for data centers (more on that distinction to come), and 61% of all data center construction in the United States is in Northern Virginia, according to the Loudoun County Economic Development Authority. In other words, the rich are getting richer.
3. There are so many data centers in Northern Virginia that for nearly 15 years, there’s been a data center under construction somewhere there every day. Obviously data centers are generating a lot of jobs there besides computer jobs. (A study commissioned by the Northern Virginia Technology Council finds that data centers generate twice as many construction jobs as they do high-tech jobs. More on that below).
4. Northern Virginia has so many data centers that it has almost as many as the second, third, fourth and fifth markets put together (Dallas, Silicon Valley, Chicago and Phoenix).
So, yeah, Northern Virginia has a lot of data centers. In Loudoun alone, the county’s 140 data centers account for more than $500 million in tax revenue. A new study commissioned by the Northern Virginia Technology Council finds that across Northern Virginia data centers account for nearly $1 billion in local tax revenue. “Obviously it’s been transformative for us,” Loudoun’s economic development director, Buddy Rizer, has said. But how much is too much? That’s the question some localities there are wrestling with now.
Loudoun County has signaled that it might want to slow down data center development. Rizer told the Frederick News-Post in Maryland that the county is running out of developable land, so there’s the question of just how that remaining land should be used and maybe data centers aren’t the highest and best use for every square inch.
As Loudoun County gets saturated, data centers naturally spread out to more outlying counties – where they’re starting to encounter more pushback.
In Prince William County, home to 33 data centers with eight more on the way, a proposal to expand the amount of land zoned for data centers has prompted a political firestorm from people who don’t want their part of the county to become the next Data Center Alley – the appellation that Loudoun has adopted. The argument for data centers: They generate a lot of tax revenue that can help hold down property taxes. They also create a smaller amount of high-paying tech jobs. The argument against: There are lots, depending on your point of view, but in Prince William’s case, much of the opposition comes from people who want the “rural crescent” part of the county to stay rural, not get paved over by data centers or anything else.
And now the Culpeper County Planning Commission has recommended against rezoning land for an Amazon data center there.
All this would seem to raise a pretty obvious question: Why don’t those data centers simply come here? Our land is cheaper. Our taxes are cheaper. Sure, I get that the data center workforce is there and not here, but people can move, right? We’ve got broadband. We’ve got at least some renewable energy – something else that data centers like because data centers are energy hogs. We’ve had economic development groups go out of their way to make it clear data centers are welcome here – InvestSWVA being the most notable – so why aren’t they here yet?
Unfortunately, it’s more complicated than that, says Josh Levi, who heads the Data Center Coalition. It’s tempting to wonder why data centers are in Loudoun County and not Lee County, but he says it’s more complicated than that.
Here’s another simplified explanation: Not all data centers are created equal. Some need to be near major metros because every nanosecond counts. The webhosting service Colocation America reports in a post about data center locations: “Data is still controlled by the laws of physics and still cannot be faster than the speed of light. It doesn’t matter how fast the connection is because the data still has to travel from one point to another. Distance plays the biggest factor in speed. Latency [the technical term for what most of us call “lag”] can affect gaming, streaming, and anything regarding data. Limiting the physical distance between the data source can greatly reduce latency.”
That’s why a lot of the data centers serving Wall Street are in New Jersey and not Norton – even though New Jersey isn’t exactly known for low taxes. A credit card processor running 19,000 transactions per second can’t afford to lose even a second. They need to be nearest the fattest fiber lines in the world. Those are the ones that go to the “primary” markets. But other data centers don’t need that kind of instantaneous processing – those are the ones we’re most likely to attract, Levi says. That’s the “secondary” market.
So what do we need to do to attract those?
“I think you’re doing everything you can do,” Levi says.
That’s both encouraging – and not so encouraging. Isn’t there more we can do?
He says data centers need seven things, not necessarily in this order:
- Access to fiber, and not your normal household fiber, either, but industrial-scale fiber.
- Renewable energy.
- A mitigated climate risk (i.e., don’t put them in places where they will flood).
- A construction workforce with experience in high-end HVAC systems – data centers generate lots of heat, so they need lots of chilling. (Of note: One company that makes a lot of climate equipment for data centers is the Munters Group, which announced last year it would build a facility in Botetourt County employing 200 people — and replace an older operation in Buena Vista. The company said that move and expansion was directly related to the growing data center market.)
- Cheap electricity.
- Low taxes.
- An available workforce.
We obviously score better on some of those things than we do others. The workforce is the hardest to address, because we don’t exactly have a lot of computer technicians just sitting around waiting for something to do. On the other hand, we do have schools that can train people if there were a demand and we do have localities that would welcome people moving in rather than moving out – this seems one of those chicken-and-egg questions. (Relative to their tax revenue, data centers don’t really employ a lot of people. The Northern Virginia Technology Council study says data centers employ about 5,550 in that part of the state, but also generate 10,230 construction jobs. The appeal for Southwest and Southside is that even if numbers are small — maybe 40 or so people per facility — these are still high-paying jobs, something in short supply in this part of the state. Glass Door puts the average salary for a technician at $64,241 a year with lead technicians at close to $81,000.)
The category that catches my eye is the one about renewable energy. Data centers like renewable energy not simply because it’s fashionable but because it’s cheap. Most of Southwest Virginia is served by Appalachian Power, which gets 64.5% of its power from coal, 19.1% from natural gas, 16.4% from hydropower and wind – so not necessarily the most green energy mix. Southside is a mix of electric cooperatives and Dominion Energy. Dominion’s fuel mix is 40.1% natural gas, 29.3% nuclear, 17% purchased power, 8.6% coal, 2.7% hydro and pumped storage, 2% other renewables – so a lot less coal. In addition, Dominion has 800 megawatts of solar power that is dedicated to (and paid for by) specific customers. (Of note: Dominion is one of our donors but donors have no role in news decisions; see our policy. You can donate and have no role in news decisions, too.) Of course, both utilities are under a state mandate to go carbon-free but Appalachian has further to go. Data centers also require lots of water for cooling. InvestSWVA has proposed using recycled mine water, which would sure save a lot of municipal water costs – and also reduce electricity demands by 90%. Meanwhile, Southside is seeing a solar energy boom, sometimes to the chagrin of those who would rather not see farmland taken over by solar panels.
Given that, there seems no reason why Southwest and Southside Virginia shouldn’t be a magnet for data centers. So why hasn’t it happened yet, other than the fact that the economy often moves a lot slower than we would like? I asked Levi if Southwest’s mere reputation as “coal country” was holding the region back. I got an interesting answer. He said “no,” but that wasn’t the most interesting part. He said he didn’t think Southwest Virginia had that reputation any longer (and keep in mind Levi has family ties to Wytheville, so he knows at least a little something about our part of the world).
“Ten years ago, I would have said something different,” he said. “Some of that is generational.” Coal has sunk so far, so fast, that many in the data center industry now simply don’t know the region’s history, he said. That seems incredible to me but we may be too close to the situation to fully judge how others see us.
So why haven’t we seen more data centers? The answer seems to be the same we hear on lots of other things: Rural areas simply have a disadvantage. If our market is the secondary market, our competition isn’t necessarily other rural areas, it’s places such as Columbus, Ohio, and Des Moines, Iowa, and Omaha, Nebraska, according to study by the real estate firm CBRE (we used to know the CB part as Coldwell Banker). In other words, metros with bigger labor pools.
So is there any hope at all then for attracting data centers to rural areas?
Levi says yes. So does Colocation America. After all, there are some data centers in both Southwest and Southside, so it’s not as if we’re starting from scratch. The biggest problem seems to be one that we encounter in lots of places: inertia. It’s always easier to do what everybody else is doing and harder to break away from the pack and do something else (even if one of those Southside data centers is Microsoft – freakin’ Microsoft – in Mecklenburg County). Just as Colocation American says data centers can’t defy the laws of physics, it’s also hard to defy basic human behavior. So the real question here is how we can change that.
The website Tech Republic says that may be on the verge of happening. It writes about one data center company – which operates small data centers – that has built operations in Big Spring, Texas; North Sioux City, South Dakota; and Kearney, Nebraska. So not the usual suspects. Compute North CEO told Tech Republic: “There’s a lot of fat on the bone in [terms of] what’s going on in traditional data centers, and they’re ripe for disruption because they’re so expensive for everything.”
Disruption – now there’s a word. Southwest and Southside have been on the losing end of economic disruptions for decades. It would be nice to be on the other side for a while, right?
Tech Republic said in 2020 that Minnesota-based Compute North intended to build five to six more data centers “all in rural locations.” One of those rural locations has since turned out to be Pitt County in eastern North Carolina, around Greenville, where it’s proven to be controversial.
Gov. Glenn Youngkin says he’d like Virginia to be competitive with North Carolina for jobs. He won’t need a data center to connect those dots.