Virginia’s energy future: Balancing growth and costs amid rising demand

Virginia faces a looming energy crisis over the next decade, with rising costs and an increasing inability to meet both consumer demand and climate goals. The primary culprit? A heavy reliance on imported energy combined with a surge in data center development, which places additional strain on the state’s power grid. To address this issue, state lawmakers have proposed energy permitting reforms, but the challenge lies in achieving consensus on the path forward.

Over the next 15 years, Virginians’ energy bills are expected to rise as much as 50%, primarily driven by the growing demand from energy-intensive data centers. While these data centers have been a boon to Virginia’s economy, their energy consumption is outpacing the state’s ability to generate sufficient power.

The issue is compounded by significant barriers to energy production and transmission. Recent legislative efforts — both successful and unsuccessful — aimed to bolster energy transmission and output, but more comprehensive action is necessary.

Reports demonstrate that building energy capacity and transmission infrastructure can be a long and arduous process — driven in large part by barriers that hinder development, such as permitting and siting laws — with transmission lines taking an average of 10 years to complete. Local restrictions also hinder the development of utility solar projects. In fact, a little over one-third of counties and cities in Virginia, as well as many other localities, have such limitations on wind projects.

Even the construction of natural gas plants to ensure that power continues to flow during peak demand is facing headwinds from “Not In My Backyard” (NIMBY) activists. These challenges align with recent research on state and local energy permitting, which highlights how restrictions and no-growth activism hinder both generation and transmission development.

Recent analysis on the impediments to both renewable sources (solar, wind, geothermal and nuclear) and fossil fuels (oil and gas), as well as obstacles to permitting and siting of transmission lines, found that permitting requirements are increasing in many areas. The main outlier was nuclear, where restrictions have been loosening. This trend is reflected in Virginia, where there is bipartisan support for development of small modular reactors (SMRs). But despite this positive development, other energy sources like solar and wind continue to be suppressed by barriers to development or by public opposition from NIMBYs.

These restrictions and resistance come at a significant economic cost. One major issue is “transmission congestion” — the inability to deliver electricity where it’s needed — which drives up costs for consumers. In 2022, this problem resulted in Americans paying an additional $20.8 billion for electricity. This issue is growing, with transmission congestion costs rising 220% from 2016 to 2022. Permitting reform and reduction in restrictions on high-voltage projects could yield tens of billions of dollars in economic benefit, and reduce hundreds of millions of tons of carbon dioxide annually.

This issue will become more pronounced since Virginia imports 36% of its electricity, the highest of any state. Energy demands are expected to double over the next decade, so it’s critical that the state takes action to allow for the production of more electricity generation and transmission. Without these changes, Virginia risks stalling economic development by discouraging load growth and undermining efforts to reduce emissions.

Legislation like HB 2037, which allows for solar panels to be placed at surface parking lots, is a great start, but more is needed. For instance, Virginia should establish an appeals process to challenge local government restrictions on market entry, such as ordinances or disapproval, when the local community’s impact isn’t properly demonstrated. Other states have similar processes in place to better protect property rights.

These and other reforms should be adopted by Virginia lawmakers. Doing so will ease strain on the grid, meet the needs of existing and future customers and help ensure that Virginia remains economically competitive.