As data center growth collides with a grid insufficient for an AI revolution, Virginia, like many other states, is exploring load flexibility for accelerating large-load interconnection while improving grid reliability and consumer affordability.

With Virginia’s legislature considering more than 60 data center-related bills in its current session, the state is fast approaching an inflection point in tackling this challenge. Whatever path it chooses, other states could follow.

Not only is Virginia the largest data center market in the US, but it is also in the country’s largest electricity market, PJM, which itself is grappling with large-load demand challenges. Therefore, Virginia’s deliberations about data centers are of interest nationwide.

In a recent meeting with Virginia electric utility commissioners on data center load flexibility and demand response, several recurring themes came through from discussions among data center operators, utilities, and other PJM stakeholders. Primary among them was that data centers are not monolithic. So, there is no one-size-fits-all solution for flexibility.

Also, most critical loads cannot be interrupted, and expanding demand response can relieve the grid quickly and speed up interconnections – but only if we update and align regulations with the operational realities of modern digital infrastructure.

Based on these commonly shared points, Virginia should move quickly on three practical reforms that would unlock meaningful demand flexibility to balance the grid, help integrate large loads faster, and lower costs for customers. Demand response is one of the few resources that can come online and add supply in under 90 days, thereby bringing down the price of power in the near term.

1. Give data centers flexible rate pathways that fit their unique operating models

Since they are not monolithic, we should think of data center flexibility on a spectrum, given the diversity of their operating models and energy footprints. For example, there are multi-tenant data centers and single-tenant facilities. Also, a cloud services data center will have a different load profile than an AI-compute data center, with each having a distinct mix of critical and flexible workloads. While some data centers may have distributed generation and batteries installed on-site, others might not. In Virginia, specifically, data center infrastructure is closely tied to national security, adding a layer of public safety considerations.

With such a wide spectrum, regulators and utilities should not confine data centers to a single path in considering solutions to integrate large loads into the grid. Rather, the goal should be to harness the unique flexibility of different data centers – whether targeting non-essential loads, HVAC and lighting systems, distributed energy resources, or other supporting infrastructure – at the lowest opportunity cost. Alternatively, large-load customers could be allowed to contract with another load in the same grid pocket to provide flexibility. With these kinds of pathways, businesses aren’t negatively impacted, but the maximum amount of flexibility is still available to the grid when needed. This level of customization can’t be met with a one-size-fits-all tariff and requires the deep behind-the-meter and market program expertise of demand response aggregators.

2. Let data centers stack demand response programs to expand grid relief

A massive amount of untapped flexible demand potential can be developed if regulators remove conflicts between different demand response programs. In many states, distribution programs are incompatible with wholesale market programs, forcing customers to enroll in one or another to avoid simultaneous participation.

Allowing data centers and other large energy users to participate in demand response programs administered at both the utility and wholesale market levels, without double-counting their participation, would multiply the grid relief provided. In Virginia, this would mean addressing issues related to Dominion Energy’s Schedule 10 tariff, which prohibits large loads from participating in both the utility’s time-of-use program and PJM demand response. New York, in contrast, is at the forefront of layering flexibility programs. Customers can participate in distribution-level demand response programs, such as the Distribution Load Relief Program and the Commercial System Relief Program, as well as NYISO’s Special Case Resource program or the New York DER Participation Model, because they meet different grid needs.

Removing the mutual-exclusivity barrier in Virginia would allow operators to stack programs and value streams, thereby improving project economics, adding a hedge against PJM price volatility, and strengthening grid reliability.

3. Clarify air permitting for on-site generators to free up more data center flexibility

Virginia and many other states can unlock meaningful demand flexibility from data centers and other large energy users by clarifying how air permits apply to the use of on-site generators for demand response. Many facilities have or will have backup generation that can run for limited hours during grid emergencies, providing demand response while staying within environmental safeguards. Federal EPA requirements are designed for this use case, allowing for finite generator dispatch during critical reliability events.

However, the Virginia Department of Environmental Quality has adopted different air permitting standards and hasn’t clearly defined what qualifies as a grid emergency or whether generators are allowed to participate in demand response during grid emergencies. That ambiguity creates risks for customers, and as a result, large energy users with generators are not enrolling in certain PJM demand response programs.

More data center customers could provide flexibility and grid relief if states explicitly confirm that limited, emergency-only generator use for demand response is allowed under permits. Clear rules would bring existing assets into the market, improving reliability and helping balance the grid as load surges.

Getting flexibility right is a win for the grid, data centers, and consumer wallets

If Virginia treats flexible demand as a first-class grid resource, the state can meet growth without overbuilding, and data center and other flexible customers can make significant contributions to balancing the grid. Updating tariffs, enabling stacked retail-wholesale demand response participation, and clarifying emergency generator permitting would unlock fast capacity, get data center customers online sooner, and reduce PJM costs, all while offering a model other fast-growing markets can follow as we grapple with a pre-AI grid in a post-AI world.