As the demand for digital services grows exponentially among individuals and organizations, the need for data centers to process all this online data also continues to expand. Recent reports out of Loudoun and Prince William counties, traditional hotbeds for data center construction, have highlighted growing challenges with future development in Northern Virginia.
At InvestSWVA and with our spinoff Energy DELTA Lab, we’ve laid out a vision that includes Southwest Virginia becoming a location of choice for data centers and other high-tech companies looking to grow. As the data center industry faces continuing constraints in other parts of the Commonwealth, we hope they’ll look to Southwest Virginia as their next home.
Why data centers?
- Data centers bring growth. Northern Virginia hosts the largest concentration of data centers in the United States, exceeding the next five largest U.S. markets combined in 2021, according to the Northern Virginia Technology Council (NVTC). This concentration has brought with it tremendous infrastructure development, including a more reliable electric grid, fiber-optic cable bundles, and important new undersea cables connecting Coastal Virginia to Europe, Africa and South America. Virginia’s data center industry is outpacing the rest of the country, growing more than twice as fast as the next-fastest growing area, Dallas-Fort Worth, NVTC reports.
- Data centers bring investment and jobs. Over the past two decades, tech firms have invested some $126 billion to build data centers in Northern Virginia, and the sector now employs some 5,400 workers statewide—not counting more than 10,000 engaged in data center construction. 5,400 jobs is not that many in a state of 8.5 million, but these aren’t just any jobs, and data centers aren’t just any business. Average annual salaries for data center jobs in Virginia were $134,300 per year in 2020. Perhaps more impressive still, data center operational investment amounts to roughly $1 million per data center employee per year: some $5.4 billion in 2021 alone.
- Data centers cost local governments relatively little while generating substantial returns. In Northern Virginia, data centers return $13.20 to local government coffers for every $1 generated as a result of their presence. In Loudoun County, for example, existing data center development represents less than 1.5% of total land area in the County, but the industry contributes approximately 30% of the General Fund budget.
Data centers require reliable electricity, access to water for cooling, and large fiber-optic cabling to carry the data from thousands of servers around the globe. These are advantages we have or can support in Southwest Virginia, and the benefits to all of us will be enormous. In fact, our Project Oasis has created the blueprint for arguably the most innovative and sustainable data center hub in the world, leveraging vast tracts of land that can provide on-site clean energy generation and abundant 52-degree water contained in former underground coal mine sites. Furthermore, we just received a $1.5 million earmark in the federal budget to accelerate this first-of-its-kind technology.
The late House Speaker Tip O’Neill famously said “all politics is local.” Never is that more true than when it comes to taxes. This is really the heart of the issue. Local jurisdictions, not the state, reap most of the benefit from businesses resident in their territories. That’s true whether we’re talking about data centers or automobile factories. The sums are stunning.
In Virginia, the total local taxes generated by data centers, either directly or indirectly, topped $1 billion in 2021, according to NVTC. Imagine if our region could get a piece of that pie. That’s new money to fund improvements in schools, community colleges, libraries, parks, roads, police and fire, health and social services. It’s a way to raise the bar and be more competitive with wealthier counties to the north and west.
There’s more to being a good neighbor than paying taxes, however. The large tech companies that build and operate data centers are also good corporate citizens, contributing funds and volunteer hours to their communities to support a variety of causes. That might mean helping to fund cabling that brings high-speed internet to more families, supporting education initiatives, and contributing to other community needs.
Amazon Web Services (AWS) has donated millions to Northern Virginia schools through its Right Now Needs fund. Google pledged $200,000 in grants to support STEM programs, teacher training, and classroom materials in Loudoun and Fauquier Counties. Data center companies like Equinix and QTS partner with public schools in Loudoun and Prince William Counties to provide internships and promote career paths leading to jobs in the data center industry. Employees from other data center companies volunteer at community farms, prepare and pack meal kits for food insecure families, participate in blood drives, and raise money for local charities. These are the kinds of neighbors we want to have. And Google recently announced an initiative to provide free high speed wi-fi in sections of Purcellville in order to “open opportunities for learning, connection, and growth.”
Data center companies have also forged ties with Northern Virginia Community College (NOVA), developing programs to help data centers meet local staffing needs. The college created a two-year Associate of Applied Science degree to train Datacenter Operations Technicians. And AWS teamed with NOVA to offer paid apprenticeships through the school. There are opportunities to do the same at all four of Southwest Virginia’s community colleges that already collaborate so well today.
As other regions of our Commonwealth are grappling with capacity issues that challenge future development of data centers, Southwest Virginia has an opportunity to compete for that business. With cheaper land, available workers, the lowest regional data center equipment tax rate in the Commonwealth and solar and geothermal cooling assets that will help data cetners meet their sustainability targets, we hope data centers will look to our part of the state for their future growth. When they do, we should welcome these data centers and the many improvements they will bring.
Will Payne is managing partner of Coalfield Strategies, LLC and leads clean energy project development for InvestSWVA and Energy DELTA Lab.