Energy prices in Virginia will increase by 25-75 percent by the end of the decade to meet data centers' growing energy needs, claims a new report.

The paper from The Jack Kemp Foundation argues that unless billions of dollars are invested in new generation and transmission capacity, regulators must acquiesce to rate increases of as much as 70 percent in the next decade to ensure that the grid functions properly and provides energy to all users.

As a result, the state could be subject to regular brownouts and blackouts. Therefore, the report contends that investment is needed to restore a healthy reserve margin and recover the portion of reserve capacity that data centers have consumed.

The report highlights the significant price increases across the Virginian market over recent years. In its latest capacity auction, parts of the state served by Dominion Energy saw a capacity market price increase from $29 to $444 per MW-day. The skyrocketing price signals the urgent scarcity in generation and transmission capacity across the state.

Data centers in Loudoun County, Virginia, already use more than twice the power generated by Virginia’s largest nuclear power plant. As a result, to satisfy the energy demand of data centers planned or under construction in the county alone would require the equivalent of several nuclear power plants to be added to the grid by the end of the decade.

The report contends that Northern Virginia’s data centers have squeezed spare capacity out of the system, as shown by Dominion registering six new all-time peak demand records in July 2024 alone.

Dominion has already connected at least 14 new data centers this year, with the connection rate up slightly year on year, with an average of 15 data centers per annum since 2013. As of July 2024, Dominion's data center demand was over 21GW, compared to around 16GW as of July 2023.

The report offers several recommendations to help lower costs for the consumer. These include having the AI companies bear the additional costs of the energy they use and building more transmission wires and power plants.

President of the Jack Kemp Foundation, Jimmy Kemp is also executive vice president of Group 47, a digital data storage company, which could potentially benefit from the report's findings.

Aaron Ruby, a spokesperson for Dominion Energy, disagreed with the study’s claim that prices could rise to 70 percent in the next decade, saying the number was “way off.”

“We just released a 15-year plan forecasting residential electric bills through 2039, and they’re only projected to grow by about 2.5 percent a year, which is lower than normal inflation,” Ruby wrote in an email to The Center Square. “Our residential rates are among the most affordable in the country. They’re 14 percent below the national average.”

In its recently released Integrated Resource Plan (IRP), Dominion stated that it is adopting an “all-of-the-above" approach to meet growing energy demand, which includes increasing power generation from every source, extensive grid upgrades, and energy efficiency programs to maintain grid reliability while meeting unprecedented growth in power demand.

The plan's power generation profile is largely derived from carbon-free sources, representing 80 percent of the overall capacity. However, the backlog of transmission interconnections for new renewable projects remains a significant issue, with a median interconnection wait time of five years for projects built in 2023, up from less than two between 2000 and 2007.

In response to the IRP, the Piedmont Environmental Council (PEC) contended that Virginians could see their electricity bills double over the period laid out in Dominion’s plan due to the billions it is expected to cost for the new renewable and transmission infrastructure to support the plans set out in the IRP.

“The energy demand forecast in the plan is more than 100 percent of what Dominion currently generates and will require the equivalent of 10 new nuclear plants to meet projected needs,” said Chris Miller, president of the PEC.

Due to these concerns, the Virginia State Corporation Commission has required Dominion to supplement its IRP with a least-cost alternative plan that does not include data center load growth.

In addition, Dominion must also prepare a Virginia Clean Economy Act-compliant plan that does not include data center load growth and will isolate how much of the IRP buildout is needed to serve data centers.