The latest report from the Institute for Energy Economics and Financial Analysis (IEEFA) has examined proposed transmission lines for northern Virginia data centers expected to cost West Virginia ratepayers $440 million.
The results revealed that the Mid-Atlantic Reliability Link and Valley Link transmission lines, both of which are anticipated to cut through parts of West Virginia, were proposed in response to forecasts of growing electricity demand in northern Virginia due to data centers. IEEFA believes grid operator PJM’s Regional Transmission Expansion Plan (RTEP) process should be reformed so that ratepayers across the PJM footprint are not bearing costs associated with transmission infrastructure due to data centers and by state policy decisions to attract more data centers.
“These projects are but two examples of how ratepayers are subsidizing electrical infrastructure projects that likely would not be needed without the addition of massive data center loads,” said Cathy Kunkel, IEEFA energy consultant and author of the report. “Under PJM’s existing transmission cost allocation methodology, West Virginia ratepayers, and others across PJM, will bear additional costs in the future for further transmission needs associated with data centers, if forecasts of data center-driven load growth in northern Virginia over the next 20 years materialize.”
According to previous IEEFA reports, there is a possibility that demand forecasts for data centers will turn out to be overstated, due to potential utility overestimation of data center demand and financial weaknesses in the artificial intelligence (AI) business model. The forecasts of growing data center loads, as well as the risk of stranded infrastructure costs, questions traditional methods of utility cost allocation.
PJM’s transmission cost allocation methods totally assume that regional transmission costs could not be attributed to a single new user or class of users. PJM’s transmission cost allocation methodology does not support Virginia making policy decisions to encourage a buildout of data centers.
Ratepayers across the region will continue subsidizing the tech industry’s electrical infrastructure demands except for PJM changing course.
