Why data centers call Virginia home

Northern Virginia is home to the largest data center market in the world, with a significant percentage of global internet traffic running through Loudoun County alone. The key to this success is two-fold, experts say.

First is history. Vinay Nagpal, president of InterGlobix, a consultancy and advisory firm focused on the convergence of data centers and subsea and terrestrial fiber, points to AOL’s establishment of its headquarters in Dulles in 1996, although the company’s founders set up the company, initially called Quantum Computer Services, in the region 11 years earlier. 

Another notable development was the creation of the Metropolitan Area Exchange, East, the first Internet Exchange Point, in 1992 in Washington, D.C., and Northern Virginia’s Vienna, Reston and Ashburn. What followed was an influx of tech companies, including data center firm Equinix, which has at least 16 data centers in Northern Virginia. Today, the region has about 250 data centers.

“The catalyst of that growth was connectivity and a high amount of dark fiber that is there in the Northern Virginia region,” Nagpal said. “Some of the roads like Waxpool Road and Sunset Hills Drive are one of the most fiber-rich roads in the country.”

Solid public/private partnerships are the second pillar of success, said Stan Blackwell, director of customer solutions and strategic partnerships at Dominion Energy. For instance, Loudoun County, which has not had a day without data center construction in more than 13 years, according to its Economic Development website, offers a 6% sales and use tax exemption on servers, generators, chillers and other server-related equipment. The county also offers a Fast-Track Commercial Incentive Program to help businesses get up and running quickly.

Once the county attracts anchor businesses, it helps connect related stakeholders, Blackwell said. For instance, when Dominion Energy signed on, Buddy Rizer, executive director for economic development in Loudoun, coordinated with fiber experts such as Nagpal and industry brokers to attract customers, he said.

“It makes it easy for a data center company to come to Virginia and be successful,” Blackwell said.

Evidence of that success lies in the Northern Virginia Technology Council’s “The Impact of Data Centers on the State and Local Economies of Virginia” report, released last month. It found that the region’s data center capacity more than doubled between 2018 and 2021, with inventory there greater than that of the next five largest markets combined.

Additionally, data centers play a major role in the region’s economy. Sixty-two percent of all new investment announced by the Virginia Economic Development Partnership in 2021 was from new and expanding data centers, and the industry supported more than 45,000 jobs, producing $3.6 billion in labor income and $7.5 billion in economic output. 

What’s more, physical space to build data centers is still available. According to LandsofAmerica.com, Loudoun has 2,000 undeveloped acres for sale, with the average price being $1 million. Neighboring Prince William County has 33 data centers, with eight more planned.

Although growth in Northern Virginia continues, the data center industry is expanding in other parts of the state, too. For instance, Blackwell said he expects to see the colocation market – data centers that rent out part or all of their space – migrate south, following large cloud providers. There are already large cloud developments in Richmond and the southwest rural areas of the state.

InvestSWVA, a public/private business attraction campaign for that area, has Project Oasis, which “defines Southwest Virginia as a location of choice in the Commonwealth for data centers based on power and broadband infrastructure along with the use of geothermal cooling technology with the billions of gallons of water collected in underground mines as a significant energy and cost-savings tool.”

Nagpal said Virginia’s Eastern Shore is also becoming a hotspot, thanks to the arrival of high-speed subsea cables that connect from Spain, France and Brazil.

“Prior to the subsea cables landing in Virginia, all the international traffic (through subsea cables) had to go through either New York/New Jersey or though Florida,” Nagpal said. It would be flying to London without having access to a direct flight from Virginia, he explained. “With these global direct international subsea cables, there is that direct level of connectivity, which is extremely fast and highly scalable.”

Despite all the benefits of the data center industry to Virginia, the growth has not been without pushback. One area of particular concern is the impact on the environment.

“Data centers use a tremendous amount of electricity. In turn, electricity production often requires a tremendous amount of water,” Landon Marston, assistant professor of civil and environmental engineering at Virginia Tech, said in an email to GCN.

What’s more, data centers rely on local water supplies to humidify and cool the buildings, added A.B.  Siddik, lead author of a paper on data centers’ environmental footprint. To address this issue, some companies are trying to treat wastewater onsite to make it potable and usable for cooling. “If they use raw water or wastewater, it will cause scaling in their cooling system,” Siddik said.

The better approach is to look at less water-intensive options. One way to do that is to build data centers in naturally chilly locations so they can use outdoor air for cooling.

Another option is cutting down on electricity generated by fossil fuels.

“Solar and wind have the lowest water footprint compared to other methods of electricity generation,” Marston wrote. “These forms of energy also have among the lowest carbon footprint as well. However, data centers operate at all times -- even when the wind isn’t blowing and at night -- so wind and solar power may not be able to meet all of a data center’s electricity requirements at this time.”

Blackwell said the data center industry is not only aware of environmental concerns, but leading the charge to support sustainable energy, with many companies setting goals of becoming carbon-free or 100% renewable. For instance, Microsoft announced last year a commitment to be carbon negative by 2030 and to remove from the environment by 2050 all the carbon the company has emitted directly or indirectly since its 1975 founding. Google stated that it is already carbon-neutral and plans to run round-the-clock on carbon-free energy at all of its data centers by 2030.

“Any time you build large-scale utility infrastructure, a lot of folks don’t like that. And data centers require big facility infrastructure, so you’re going to have that kind of community pushback -- whether it’s a data center, manufacturing plant, chemical plant,” Blackwell said, adding that Dominion Energy aims to be carbon-neutral and has started the process of building off-shore wind and solar systems. 

The efforts are encouraging, Nagpal said, because the data center business will only continue to grow.

“As the explosive growth of data continues around us, both from the enterprise side and from the consumers’ side, the enterprises are rapidly moving toward digital transformation, they are moving multiple workloads to the cloud,” he said. “To be able to sustain that, you need more digital infrastructure.”

Stephanie Kanowitz is a freelance writer based in northern Virginia.