Data centers in Ashburn, Virginia (Gerville / Getty Images)
Virginia, home to the country’s largest concentration of data centers, faces a critical juncture in its energy future. As the demand for data storage and processing grows, so does the need for reliable, sustainable, and affordable energy to power these facilities, the largest of which can consume more than 100 megawatts (MW) of power. That’s equal to the production of a single large utility-scale facility — enough to power tens of thousands of homes. The rise of AI will greatly increase the power needs of data centers.
Policymakers and energy providers are exploring the potential of small modular reactors (SMRs) to meet the growing energy needs of the data center industry. While SMRs offer the potential for clean, reliable energy, their development and deployment face significant challenges and limitations.
SMRs are a type of nuclear reactor that are smaller in size and power output compared to traditional nuclear power plants. They are designed to be modular, meaning they can be factory-built and transported to the site of installation, potentially reducing construction time and costs. SMRs typically have a power output of approximately 300 MW (MW) and can be used for a variety of applications, an obvious-looking one being electricity production to power megawatt-hungry data centers. In 2022, Gov. Glenn Youngkin suggested that the state’s first SMR would be built in Southwest Virginia, but in March the governor reversed course, and the focus has shifted to areas that have a more established nuclear infrastructure.
The industry is gearing up to potentially employ SMRs as part of the power stack for data centers. Stakeholders definitely noticed when Microsoft commenced a nationwide search for a “principal program manager for nuclear energy and then when it announced in January 2024 that it had hired Directors of Nuclear Technologies and Nuclear Acceleration.
As Virginia navigates this complex energy landscape, a wisely balanced approach is crucial. SMRs are not a panacea. We should continue to recognize the vital role of solar energy and other renewable sources in our state’s energy mix. Only by embracing a diverse and inclusive energy strategy can Virginia meet the demands of its burgeoning data center industry while ensuring a sustainable and prosperous future for all Virginians. Additionally, this embrace of diversity will be mission-critical for Dominion Energy to meet the statutory requirement under the Virginia Clean Economy Act that 100%of its energy be produced by renewable sources by 2045.
The risks of overreliance on SMRs
While SMRs represent a promising avenue for clean energy production, it is essential to recognize that they are not a silver bullet solution to Virginia’s energy challenges. One of the most significant risks associated with an overemphasis on SMRs is that this technology — years away from coming to fruition — may be used as a pretense to block the development of solar energy projects in rural Virginia counties.
In recent years, there has been growing opposition to solar development in many rural communities across the state. As I noted in a previous commentary piece for the Virginia Mercury, “A clear trend has emerged of Virginia counties purposefully limiting their own options. An increasing number of them are imposing explicit moratoria or near-bans on solar development.” This opposition is often rooted in concerns about the impact of solar projects on local land use, property values, and aesthetics. An oft-cited opposition argument is that the energy produced in these rural farms is “just sent up to Northern Virginia.”
The promise of SMRs risks exacerbating this trend by providing opponents of solar development with a new argument to justify their position. They may argue that with SMRs on the horizon, there is no need to invest in solar projects that could, allegedly, have negative impacts on local communities. This line of reasoning, however, ignores the fact that SMRs are still years away — perhaps as much as 20 years away — from widespread deployment and face significant permitting challenges. Further, when sites are identified, they will almost certainly face local “NIMBY” opposition themselves. It’s also worth noting that one SMR’s electrical production is approximately that of two orange solar farms — hardly the sort of production that moots solar.
Virginia legislators recently authorized Dominion Energy and Appalachian Power to move forward with initial development efforts for two nuclear reactors but, as Virginia Mercury columnist Ivy Main colorfully noted, “This is not a fix. It is like scheduling knee surgery for next year when you are having a heart attack today.”
Therefore, curbing today’s development of reliable, cost-effective renewable energy, and overemphasizing the present significance of SMRs in meeting Virginia’s energy needs, could leave Virginia in a very precarious position.
The case for a balanced, holistic energy approach
To meet the growing energy demands of Virginia’s data center industry while ensuring a sustainable and resilient energy future, it is essential that we adopt a balanced, holistic approach that embraces a diverse mix of energy sources. This approach should include a combination of SMRs, solar energy, and other renewable sources such as wind and hydropower — as well as energy derived from fossil fuels. Fossil fuels still play a significant role in Virginia’s energy mix and will likely continue to do so, although gradually declining in importance, for the foreseeable future. It’s unrealistic to suggest otherwise.
SMRs, although promising, face significant challenges that could delay their widespread deployment beyond even the 20-year timeframe. For one thing, such projects face significant licensing challenges at the state and federal level, including by the Nuclear Energy Regulatory Commission, whose processes include an extensive review of safety, environmental, waste management and other issues associated with nuclear projects.
Nuclear energy is also expensive, especially when compared to solar. According to a 2023 analysis by Lazard, a financial advisory and asset management firm, the cost of generating electricity from new nuclear plants in the United States is significantly higher than the cost of solar energy, even when accounting for energy storage. Lazard estimates that the unsubsidized levelized cost of electricity (LCOE) from new nuclear plants will range between $141 and $221 per megawatt-hour (MWh).
In contrast, Lazard projects that the unsubsidized LCOE for newly constructed utility-scale solar facilities will range between $24 and $96 per MWh. This means that, on average, solar energy with storage is likely to be less than half the cost of electricity generated from new nuclear plants. (It is fair to acknowledge that these costs are current estimates and that nuclear power could get more cost-effective over time, by improved technology, for example.)
These cost differences have significant implications for Virginia’s energy future. By prioritizing solar energy development now, the state can not only reduce its carbon footprint but also ensure that electricity remains affordable for consumers and businesses. Moreover, the lower costs of solar energy can help to attract new industries and businesses to the state, driving economic growth and job creation.
Ultimately, the key to Virginia’s energy future lies not in a false choice between SMRs and solar, but in a comprehensive approach that recognizes the strengths and limitations of each energy source, plus traditional sources of energy, while working to reduce our reliance on fossil fuels and reducing our carbon footprint over time. Instead of either/or when it comes to energy, let’s focus on all of the above.
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The post Balancing Virginia’s energy future: A holistic approach to powering data centers appeared first on Virginia Mercury.
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