What happens in Vegas stays in Vegas, or so they say.
What happens in Northern Virginia doesn’t always stay in Northern Virginia, though.
That’s true for the region’s success. Northern Virginia is the biggest economic engine, accounting for 42% of the state’s tax revenue. Much of that tax revenue finds its way to rural Virginia. Rural localities (and some that aren’t rural) get most of their school funds from the state (as high as 67% in the case of Scott County), so Northern Virginia’s economic success indirectly pays for many services in rural Virginia.
The challenges facing Northern Virginia work the same way, just in reverse: When it faces an economic downturn, all parts of Virginia feel the pinch.
That’s why what’s happening in Northern Virginia now is a concern for Virginians as far away as Lee County in our southwestern corner: The region’s major employer — the federal government — is downsizing, and that raises questions about what any slowdown in tax revenue from Northern Virginia will mean throughout the state. A study by the Weldon Cooper Center for Public Service at the University of Virginia concludes that “a 10 percent reduction in the federal workforce could create $6 billion in total state GDP loss and nearly $250 million in total state tax revenue loss.” For context, that’s more than the state sends each year to school systems in what we typically think of the seven “coal counties” (even that description misstates the current role of coal in their economies).
On Monday, the Northern Virginia Chamber released what it labeled “A Call For Action for Northern Virginia’s Economic Growth,” a 28-page plan to diversify the region’s economy. That isn’t a plan that just concerns Northern Virginia, it concerns all of Virginia — the rural parts that are dependent on Northern Virginia tax revenue most of all.
I’ve seen enough of these economic development plans produced by the business community to know that what the business community wants doesn’t necessarily happen. Many parts of this plan depend on action by the state government and other political actors, all of whom will have their own agendas and potentially competing interests. On the other hand, the business community is typically a force in any community, so when the business community in the state’s largest metro speaks, we ought to pay attention. Maybe not every bullet point here matters, but the general thrust of the plan is worth an examination, not just because Northern Virginia is economically and politically important, but because some of the things the Northern Virginia business community wants will have an impact on the rest of the state.
The big picture: To diversify Northern Virginia’s economy beyond dependence on the federal government, the report urges that the region focus on building up its already strong base in the technology sector. That seems pretty obvious. “To create a new economy, the region must cultivate industries with high-growth potential and global demand,” the report says. That doesn’t seem controversial either, but let’s keep going. The report continues: “Focusing on emerging technologies such as AI and quantum computing, space, semiconductors, biotech, and robotics can drive economic value across industries including defense, logistics, life sciences, and clean energy.”
Here’s where we get to the parts of the report that spiderweb their way out to the furthest corners of Virginia.
Any push for more artificial intelligence means more demand on rural Virginia to produce solar energy
A report late last year by the General Assembly’s research arm warned that Virginia’s energy demands may triple by 2040, due primarily to the growth of energy-hungry data centers. Artificial intelligence uses even more energy than more conventional computer functions, by some accounts 10 times as much. Whether the Northern Virginia business community wants more artificial intelligence or not, the marketplace at large does. We’re going to need a lot more energy — nationally in general and Virginia in particular. Unfortunately, Virginia already imports more energy than any other state, and that power tends to come from states where power is more expensive than ours. This week brought more energy news: The independent watchdog for the electric grid that serves Virginia and all or parts of 12 other states and the District of Columbia reported that the grid has no capacity left. That watchdog, Joe Bowring, president of Monitoring Analytics, announced: “The solution is to make sure that people who want to build data centers are serious enough about it to bring their own generation.”
This report from the Northern Virginia Chamber acknowledges the need for more power, but the solution it proposes is years away: small modular nuclear reactors.
SMRs, as they’re called, are exactly what they sound like: smaller versions of more conventional nuclear reactors, perhaps one-third the size. The “modular” comes from the concept that they can be mass-produced in a factory and shipped to the site. The biggest obstacle to conventional nuclear power has been that it takes a long time to build a nuclear plant and that’s a big reason nuclear power is often the most expensive form of power. The idea with SMRs is that they can be built quickly, and therefore more cheaply.
Notice I’ve used phrases like “the concept” and “the idea.” That’s because we have no SMRs at present. Russia and China have SMRs, and Canary Media reports there are 74 in some form of development around the world. Here in Virginia, both Dominion Energy and Appalachian Power have proposed SMRs — Dominion at its North Anna nuclear power station in Louisa County and the Yorktown Naval Weapons Station, Appalachian at its Joshua Falls substation in Campbell County. (Here’s where we have our standard disclosure that Dominion is one of our donors but donors have no say in news decisions; see our policy.) There’s obviously a lot of enthusiasm for SMRs. However, since we don’t actually have any, we don’t know how realistic this vision of a fleet of small reactors is. There’s no question about the technology — we’ve had small reactors in submarines since the 1950s. The question is about the economics. The danger is that SMRs are like the space shuttle: We were told that would bring down the price of space travel because the turnaround time between flights would be quick. It wasn’t, and now the shuttle fleet has been retired.
Reality check: Canada is ahead of the United States on SMRs. It currently has one under construction in Ontario. The utility broke ground in 2022; site preparation alone took three years and was just finished this year. Construction of the actual reactor began this year, with a projected completion date of 2030 — that’s eight years from start to finish, if it stays on schedule. Maybe SMRs are the long-term solution (I’m not an engineer so I can’t say), but the power demands are happening now. That means just one thing: There’s going to be a lot more demand for solar power, because solar is the quickest form of power to get up and running. In the short term, Northern Virginia’s quest to become an AI hub is going to put more pressure on rural Virginia, especially Southside, home to about half the state’s solar farms.
Northern Virginia’s AI ambitions will put more pressure on the General Assembly to rewrite the Clean Economy Act
Sen. Scott Surovell, D-Fairfax County, occupies two important positions: He’s the Senate majority leader. He’s also chair of the state’s Commission on Electric Utility Regulation, which is charged with reviewing the state’s energy needs and making recommendations. He says he’s heard “loud and clear” that rural Virginia is tired of bearing the brunt for producing energy and thinks Northern Virginia should do more to produce its own energy. He says there needs to be a “massive build-out of rooftop and parking lot solar” in Northern Virginia. Multiple bills to encourage just that passed the legislature this year and were vetoed by Gov. Glenn Youngkin. We’ll have a new governor next year. If it’s Democrat Abigail Spanberger, she’s signaled in an interview with Cardinal News that she’s more open to rooftop and parking lot solar. We don’t really know yet how Republican Winsome Earle-Sears feels but I intend to ask her if I get a promised interview.
Northern Virginia’s push for AI will accelerate not just power demands, but also the political pressure in Richmond to rework the state’s Clean Economy Act, which mandates that the state’s two biggest utilities adopt a carbon-free electric grid by 2050. The act was written at a time when the state’s power demands were relatively flat; now they’re not, so it may well be due a revision to account for new realities. However, Democrats and Republicans would change that law in different ways; Republicans would likely junk it altogether. Again, I’m not an engineer so I don’t feel qualified to weigh in on what works and what doesn’t, but I do feel confident in weighing in on the politics: Republicans have the easier argument to make — that we need natural gas to supply more power. My question for Democrats on energy is always a political one: Right now, Virginia gets about 7% of its power from solar. If that little solar has created this much controversy, how can we expect to produce even more solar?
The Northern Virginia chamber wants small modular reactors next to data centers
This seems like the most controversial part of the report: It suggests putting SMRs on data center campuses. This is not a new idea; it’s one that has been floating around. The main advantage: You don’t need big transmission lines, and transmission lines are just as controversial in Northern Virginia as data centers.
The proposal for an SMR at North Anna hasn’t generated opposition; after all, there are already two big reactors there. But the mere suggestion of an SMR in Southwest Virginia has produced opposition — even though not a single utility has actually proposed such a thing. How will Northern Virginians feel about small nuclear reactors in their midst?
Until some company actually proposes an SMR next to a data center, I’m not inclined to take this idea seriously. However, there is a serious question lurking behind this suggestion. The report doesn’t put things as bluntly as I’m about to, but this seems to be the choice: Much of rural Virginia is tired of covering up its farms with solar panels to support Northern Virginia, so which would Northern Virginia rather have: big, buzzing transmission lines or an SMR over in the industrial park? If the answer is “neither,” then how is any of this going to work?
The Northern Virginia business community is at odds with the Trump administration on some key aspects of energy policy
Or maybe it should say that the Trump administration is at odds with the business community. One of the sectors that the report says Northern Virginia should pursue is clean energy, yet the Trump administration has tried to shut down the growth in that sector. Trump has banned most offshore wind development, and the One Big Beautiful Bill Act does away with many of the tax incentives that have powered the growth of clean energy.
The report calls for more clean energy (and it specifically mentions solar and battery storage) not just for energy purposes, but as a job-creating sector. Trump wants more artificial intelligence, but here’s the business community in the part of the country that has more data centers than any other saying it also wants a form of energy that Trump isn’t keen on.
Virginia colleges will see more pressure to produce more technology graduates
That’s nothing new. As part of Virginia’s pitch to lure (and eventually win) Amazon’s HQ2, the state promised to ramp up the number of computer science graduates it produces — and to build Virginia Tech’s Innovation Campus next to Amazon. This report puts a lot of emphasis on the need to develop a more tech-focused workforce. It highlights a particular need for more computer science graduates. One bullet point reads: “Integrate mission-driven career pathways into university and college curricula, focusing on emerging sectors where Northern Virginia excels.”
There are only two four-year universities in Northern Virginia: state-supported George Mason (enrollment 28,956) and the private Marymount University (2,504 undergraduates). If Northern Virginia needs more computer science graduates, it seems almost certain that those market demands will be felt at other universities across the state.
I’m not saying that’s a bad thing; I’m just saying it’s a thing — one that may be felt in the form of funding decisions in Richmond.
There are lots of other things in this report (such as how to make housing affordable) and lots of things that aren’t in here (tourism, for instance, which has been a political topic because of a proposal to create an “entertainment district” that would include a casino, a concert venue and a convention center). I’m skipping over to focus on the parts of the report which, if implemented, would have the most direct impact on the rest of the state. These also seem the parts that seem most likely to happen, in some form, no matter what happens.
The marketplace is already driving more development of artificial intelligence. The marketplace is already demanding more power — and the easiest place so far to develop that power is in rural Virginia. There’s already a lot of interest in SMRs (and Lynchburg, a nuclear industry hub, could well be a place where some of those get built). Many tech companies have specifically said they want green power, no matter what Trump wants. The job demands out of the state’s biggest metro are naturally going to be felt at the state’s universities. The question out of this report isn’t whether these things will happen, since they already are. The question is to what degree they all increase in the years ahead — and to what extent state government wants to encourage all these things.
We’ve been unsuccessful in persuading Spanberger and Earle-Sears to agree to a debate in Southwest Virginia. Perhaps the Northern Virginia chamber might be more successful in persuading the candidates to debate there — and make all the questions about how to diversify Northern Virginia’s economy. Ultimately that’s a topic that touches all of us in the pocketbook.
Want to see where the statewide candidates stand? We’ve sent questionnaires to all of them and posted the responses from the ones who have replied in our Voter Guide. We’ve also sent questionnaires to all the House of Delegates candidates across the state, as well as to local candidates in Southwest and Southside. We’ll be posting those responses in August after we build out more parts of the Voter Guide.
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