Why Henrico Likes the Facebook Project

Gary McLaren, executive director of the Henrico County Economic Development Authority.

This afternoon I caught up with Gary McLaren, executive director of the Henrico County Economic Development Authority, who addressed the main questions I raised in the previous post. The Facebook data-center project, he says, is a great deal for Henrico County citizens and taxpayers.

Facebook will locate its $750 million data center in the White Oak Technology Park, in which the county had invested $40 million in the 1990s to induce semiconductor manufacturer Infineon Technologies AG to locate there. The plant, later part of Infineon spin-off Qimondo, was an excellent corporate citizen while it resided in Henrico, but it closed under competitive pressure of subsidized offshore chip plants.

The Infineon legacy bequeathed three important assets to the White Oak Park, says McLaren. First, thinking that the county might attract other semiconductor plants, the county had oversized its water and sewer lines. Thus, White Oak had 10 million gallons a day of excess water capacity and 13 million gallons of sewer capacity — more than enough to handle the estimated 3.5 million gallons-per-day needed to cool Facebook’s servers.

Second, the park was well supplied with fiber optic trunk lines. “We’re up to eight or nine fiber companies that have run fiber into the park,” McLaren says. Making the location even more attractive, he adds, is the laying of three separate transatlantic cable lines terminating in Virginia Beach. While he doesn’t know it for a fact, he is almost certain that Virginia Beach will link to the North American fiber grid through the Richmond region, making Henrico an ideal location for serving both North America and trans-Atlantic markets.

Third, the park is served by dual feed power. Dominion delivers electricity to the park via two transmission lines. If one line shuts down for whatever reason, the other will keep the park supplied with electricity. While designed to meet the specs of the semiconductor plant, the redundancy fits the needs of the data center industry as well. Says McLaren: “We  have a unique and robust technology park ready to go.”

Henrico County has a good number of data centers. McLaren won’t say exactly how many — some corporate entities would prefer to keep a low profile — but reports have reported the number as twenty. Well known data centers include QTS Data Centers, Peak 10, and Capital One. As the data-center industry explodes, Henrico wants a bigger piece of the pie.

Northern Virginia localities Loudoun County and Prince William County are widely recognized for their large clusters of data centers. Thanks to their proximity to MAE-East internet exchange points in Northern Virginia, the two jurisdictions got off to a strong head start in attracting server farms. To get a bigger share of the business, Henrico had to do something dramatic to increase its competitive posture, McLaren says, so it the tax rate on computers and computer-related equipment.

“We decided we could have a strong value proposition if we made ourselves more competitive” by cutting the tax rate, says McLaren. The thinking was: “Would we rather have 100% of nothing or X percent of something?”

Cutting the tax rate from created a windfall for the dozen or more existing data centers in Henrico County, McLaren concedes. But after the Facebook announcement, the net effect is positive. “I can tell you, with this announcement we are more than made whole.”

When asked for specific numbers, McLaren says he cannot provide them. A breakout of the net gains resulting from the tax break would list data centers and detail proprietary information such as how much they’re investing in real estate versus how much in computers and other capital equipment. In effect, Henrico citizens have to trust that their local government knows what it is doing.

A second inducement offered Facebook — an $863,000 credit on a water-sewer connection fee that normally would cost around $2 million — won’t cost county citizens anything, McLaren says. When the county built the water-sewer infrastructure for White Oak years ago, it gave the Economic Development Authority some credits it could dole out to major prospects to reduce their connection costs. “From time to time, we can use [the credits] as an incentive for companies. … We’ve used them for other companies that have come into the White Oak Tech Park.” Issuing the credits creates no new liability for the county or its taxpayers.

McLaren hopes the visibility of the Facebook deal puts Henrico in the running for more data centers. He is told by industry consultants that the good sites for data centers in Northern Virginia have been taken. While NoVa has many advantages, it’s getting more difficult to supply electricity to the region. Public opposition to Dominion Energy Virginia proposed Haymarket transmission line suggests that the easy-to-serve locations might be tapped out.

Henrico has one less visible advantage in its competition for data centers, McLaren says. The county is highly responsive to economic development prospects and can move quickly. Speed to market is critical to technology companies. Facebook, he says, told him yesterday, “that our willingness to fast track their project … made a big difference in their impression of Henrico County.”

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18 responses to “Why Henrico Likes the Facebook Project

  1. re: ” White Oak had 10 million gallons a day of excess water capacity and 13 million gallons of sewer capacity ”

    to put this is perspective – “excess” capacity is MORE than what the City of Fredericksburg (25,000) has. It’s in the same ballpark as Stafford or Spotsylvania (at 130,000 people) has.

    And no.. that capacity did not suddenly appear and was “free”.

    Millions and millions of dollars went to build that capacity and normally water/sewer are what is called “enterprise” which means not paid for with taxes but water users. This size and scope of water/sewer usually is financed .. significant debt and a long payback… from future hookups.

    And that debt counts towards the debt capacity of the county…

    It could well be that the Infineon folks had put money into the water/sewer and essentially left that money behind when they departed.

    I’m not dinging the Henrico ED folks… just saying that one would suspect a significant amount of money – and debt is involved in that size water/sewer system and typically not subsidized by taxpayers.

    It actually goes to just how well run Henrico appears to be.. they are AAA.. they are one of but two counties in Virginia that are responsible for their roads… and clearly they are successful in the ED realm.

  2. > Public opposition to Dominion Energy Virginia proposed
    > Haymarket transmission line suggests that the easy-to-serve locations
    > might be tapped out.

    In what universe? Claiming Prince William is “tapped out” for new data centers may reflect Dominion’s bias, but is not a realistic assessment.

    In 2016, the county designated nearly 10,000 acres as a Data Center Opportunity Zone Overlay District. There are powerlines there to supply new data centers, and Prince William County’s taxes for Computer Equipment are 1/3 of Loudoun’s. That’s why new data centers keep popping up.

    There is a problem with one data center proposal, located west of Haymarket. Amazon already has one building in operation there. Dominion Energy is speculating that Amazon will build two more, and requesting State Corporation Commission to build a new, unplanned transmission line based on that speculation.

    There is now 3.5 million square feet of data center space in Prince William –
    and room for more in the Data Center Opportunity Zone Overlay District.

    If you want to experience “tapped out” while looking at data centers in Prince William, come visit Farm Brew LIVE in Innovation Park and try their beer.

  3. Here is what Dominion has posted on its website about the proposed new Rider RF, to be filed with the SCC “later this month”:

    “The Facebook data center would be served under a new renewable rate option called Schedule RF (renewable facility), which Dominion Energy Virginia plans to file with the Virginia State Corporation Commission later this month. If approved, Schedule RF would allow Facebook to offset its annual energy needs with clean, renewable energy delivered to the grid. It would also create opportunities for other large companies wishing to make the same commitment, and would provide broader economic benefits to all of Dominion Energy Virginia’s 2.5 million customers. This new product offering would ultimately lead to new business opportunities. As a secondary economic impact, millions of dollars of new renewable energy projects would be built in the Commonwealth.

    “Dominion Energy Virginia and Facebook worked extensively on creating the Schedule RF structure to meet customer needs. To qualify for the voluntary and experimental rate option, a customer must bring new electrical load and agree to purchase environmental attributes from renewable energy sources as defined in the Code of Virginia. Through Schedule RF, Facebook will support energy expected to come from the sun.

    “Dominion Energy Virginia is actively growing the market for clean energy. Schedule RF will further support diversification of the company’s generation portfolio for the good of all customers. The company’s 2017 Integrated Resource Plan calls for at least 5,200 MW of new solar generation by 2042, enough to power 1.3 million homes at peak output.”

    This, to me, implies that Dominion itself intends to build a lot more utility-owned solar around Virginia, and will participate as a seller of Renewable Energy Credits (RECs) in the PJM-region State REC markets, just as Facebook will participate as a buyer of RECs. If the right questions are asked and answered we should learn a lot, during the upcoming SCC investigation of Rider RF, about Dominion’s new commitment to renewable energy generation.

  4. You or Tom H. could probably do a rough calculation how much land it is going to take to build solar farms sufficient to meet this commitment.

    • You need 4-5 acres per MW… so they need about 500 acres. There are about 2000 acres in total at the location of the FB facility .

      But that business park is basically built in a swamp… and between the rooftops, parking lots and another nearby unbuildable land – I’m curious why the solar would not be there and nearby and feed into the substation that serves that park.

      That would be a much more direct use of solar and would be operated in tandem with the grid as backup.

      The idea of buying .. “solar” installed elsewhere.. is more PR than actual use of solar itself to power a facility and it really just offloads the actual logistics of incorporating solar into a dynamic 24/7 grid.

      The problem has always been how to use solar when it is available and to have backup to step in and power the grid when solar is not available.

      You cannot do this with baseload power… which cannot dynamically vary it’s output which is what solar needs in order to be “harvestable”.

      So.. you have to have some kind of non-solar, non-baseload generation that is dispatchable in real-time – in response to a loss of solar generation.

      The only thing that really fits that bill is gas. Some of the newer combined-cycle gas plants can be operated both as peakers and base load.

      The business park actually has gas available. They COULD have built a true gas/solar hybrid facility – on site… and actually if you really want to look ahead… a new Dominion gas plant at that site can generate electricity that goes down I-64 to the Peninsula!!!

      but apparently both FB and Dominion prefer the idea of “offsets” better…where FB gets a quick and dirty “all-renewable feather in it’s cap and Dominion can figure out where solar … can be accommodated best – on their existing grid.. i.e. what sites their grid can handle the increased variability that is inherent with solar.

  5. The idea of buying .. “solar” installed elsewhere.. is more PR than actual use of solar itself to power a facility and it really just offloads the actual logistics of incorporating solar into a dynamic 24/7 grid

    Agree fully. If a big company wants to tout itself as green and using solar or wind power, it needs to have the generating source onsite or connected to the green building.

    It reminds me of an airplane flight conversation I had a few years ago with the director of facilities for a major U.S. corporation. He told me that, if a company was willing to spend a $100K plus with lawyers and consultants, it could always get LEED certification for a new or remodeled building.

    If a business cannot provide its own green power 24/7 (save an emergency), it shouldn’t be claiming it is self-sustainable.

  6. If the way electricity is charged is by dividing it into two components… the actual cost of the electricity generated and the cost to distribute it….

    Such that everyone pays their fair share of the infrastructure costs and then how much electricity you use – why is that a subsidy and a disadvantage to you or anyone?

    Are you essentially advocating, in addition to pro-rata share and consumption fees, a 3rd fee which is a type of “availability fee” like we see used when you get a water/sewer hookup?

    • You are right, the purpose of these different charges is to avoid cross-subsidization. Actually, most electric bills do contain an energy charge (volumetric), a “wires” or grid charge (reflecting peak demand, or highest volume, during the billing period), and a third component, a customer or billing charge (fixed). For residential customers, the customer charge is often rolled into the volumetric charge by increasing the rate substantially for the first few kWh consumed each month; and absent a meter that measures highest demand, the grid charge may be calculated based on the peak demand typical for a given level of consumption and then applied volumetrically as well. Of course, a customer with on-site generation is not “typical.”

  7. LG, you say, “The idea of buying .. “solar” installed elsewhere.. is more PR than actual use of solar itself to power a facility and it really just offloads the actual logistics of incorporating solar into a dynamic 24/7 grid.” But that logistical problem has ALREADY been offloaded by virtue of Dominion’s participation in the PJM grid. PJM is the system operator, not Dominion. That means that even if the solar was on the roof of the Facebook building, it would fall under the PJM dispatcher’s control. That’s why it really makes no difference where, inside PJM, the load or the solar generation is located, so long as the load wants to buy the RECs (renewable energy credits) associated with that amount of solar power.

    That said, two things should be mentioned. First, solar is almost never dispatched off for economic reasons, simply because its marginal cost is near zero, so the PJM dispatcher doesn’t play much of a role with solar. Quite the opposite when it comes to dispatching the backup gas power you talk about. Second, there is no good reason the solar collectors shouldn’t be on the rooftop. It is an absolute waste of the space not to put them there. The real reason, I suspect, has to do with the logistics of construction, site control and security; Facebook probably doesn’t want to have to coordinate access to its rooftop with a third party, Dominion, to own and maintain the solar collectors there — or do it itself. In fact this is the biggest obstacle to renewables self-generation by small businesses and industrial sites: the people in charge of these sites don’t want to bother with the hassles of generating for themselves or hiring third parties to do it for them, even if it saves them substantially, unless the site is large enough (like a military base or college campus or hospital) already to have an employee there whose full time job is energy management.

  8. Unless the private generation is being sold over the “public” grid, why is PJM involved at all? If a factory or data center has on-site or connected solar generation that is used for operating the plant and for no other purpose, PJM or Dominion, for that matter, should have nothing to say about the power. If the factory or data center has a back-up connection to the public grid, it needs to pay for the standby connection and the power as used–just like any other customer. And Dominion and PJM would play their traditional roles.

    Even if Dominion were to maintain the solar array, that’s not a utility service, but an adjunct service for which Dominion shareowners should bear all the risks and reap all the profits.

    Finally, why wouldn’t a Facebook or any large private power generator want to hire 3rd party contractors to manage their power? They probably outsource lots of operations.

    • ANY generation within the PJM “control area” and connected synchronously to the grid is under PJM’s operational control regardless of who owns it. The only exceptions are very small customer-owned generation like rooftop solar (I don’t know the maximum size), and larger customer-owned generation that operates in isolation (like an emergency generator in a hospital). This has to do with operational stability and safety on the grid, not sales. If, for example, the US Navy wants to have its own “microgrid” and generate for all the load on that microgrid, separate and apart from the larger grid, then, fine. But once they go in parallel (sychronized) with the larger grid, so that power flows freely back and forth, the Navy’s generator falls under PJM control.

      • “When the power flows back and forth” OK, that makes sense that PJM would be involved. However, in the event the private generator’s load cannot be fed into the “public” power system, there is no reason to let PJM into the mix.

        My factual assumption may not represent what occurs. But private is private in my eyes. And unless state lines are crossed, this is not interstate either.

        • Agreed. But in fact most electricity is consumed in “parallel with” the grid. Two reasons: generation on any grid (even a “microgrid”) must exactly equal load, which is much harder to accomplish with a small, isolated load; and the larger the grid generally the more efficient it is, thus lower cost.

  9. yeah… there’s something no right with this. If PJM controls the generation then why is FB talking to DOM?

    Somehow.. it seems like FB’s options are limited to dealing with DOM only.

    why is there this complicated arrangement with DOM in the first place if FB could contract with a 3rd party to build and generate solar to sell to PJM?

    Isn’t that what Amazon did with the A&N Eastern Shore Cooperative?

    I think there is some things we don’t know and don’t understand here.

  10. So how about Acbar. How come 3rd party businesses have to deal with DOM instead of PJM if DOM really has nothing to do with the electricity produced by 3rd party businesses?

    Something is missing from the current narrative about PJMs role in the production of electricity by independent/3rd party producers.. both solar and gas…

    I note that in Fredericksburg there is a coal plant called Birchwood Power. It’s called a dispatch plant for Dominion. That Dominion can call it up when they need power. I think I got this right but if I do.. there’s a conflict with the narrative that DOM has to go to PJM when they have a need for more power.

    There must be different kind of independent producers – those that have nothing to do with DOM and participate solely in PJM.. and then producers with some kind of arrangement with DOM that essentially does not go through PJM.

    For all the world – this looks like what is happening with the Facebook deal.

    There is no PJM.. it’s strictly between FB and DOM and whoever both of them deal with in a 3rd party who will build the solar that is equivalent to what FB will pull off of Dom’s grid.

    • “There must be different kind of independent producers – those that have nothing to do with DOM and participate solely in PJM.. and then producers with some kind of arrangement with DOM that essentially does not go through PJM.”

      Nope, it’s all optics. If the Birchwood coal plant wants to run, it must be dispatched by PJM.

      Dominion may PORTRAY this as a private deal with Birchwood because financially it’s easy to set up a contract that mimics a private deal, but in fact PJM is the system operator for every power plant in PJM — with the sole exception of tiny homeowner generation like rooftop solar, which is exempted for simplicity alone.

      PJM dispatches generation based on the sale price the generation owner bids into the PJM energy market — lowest bid first. If the generator wants to assure that its unit is dispatched, it bids low. A generation owner can also ask PJM to “must run” the unit regardless of its bid, for operational reasons — like a nuclear unit that can’t be shut down easily. Any PJM generator can have a side deal with any PJM utility that the utility tells it what to bid for PJM market purposes and pays the generator a fixed price for the right to do so, in exchange for the utility claiming whatever income the generator earns in the market. So, in effect, the independent generator acts like one of the utility’s generators. But PJM doesn’t need to know and doesn’t care about such side deals. As far as PJM is concerned, the generator is bidding and operating independently.

      Now, both a utility and an independent generator participate directly on the WHOLESALE market, as buyer/seller and seller respectively. FERC regulates the wholesale market. But Facebook is a RETAIL buyer of electricity and must deal directly with a utility authorized to sell at retail. In this case, that’s Dominion. Dominion has negotiated a special deal with Facebook and agreed to file it as “Rider RF.” We will get to see that when it’s filed with the SCC later this month. The SCC regulates all retail sales of electricity in Virginia.

  11. re:
    ” Nope, it’s all optics. If the Birchwood coal plant wants to run, it must be dispatched by PJM.

    “Dominion may PORTRAY this as a private deal with Birchwood because financially it’s easy to set up a contract that mimics a private deal, but in fact PJM is the system operator for every power plant in PJM — with the sole exception of tiny homeowner generation like rooftop solar, which is exempted for simplicity alone.”

    optics it is.. then..

    ….

    “Now, both a utility and an independent generator participate directly on the WHOLESALE market, as buyer/seller and seller respectively. FERC regulates the wholesale market. But Facebook is a RETAIL buyer of electricity and must deal directly with a utility authorized to sell at retail. In this case, that’s Dominion. Dominion has negotiated a special deal with Facebook and agreed to file it as “Rider RF.” We will get to see that when it’s filed with the SCC later this month. The SCC regulates all retail sales of electricity in Virginia.”

    okay – so PJM sells ONLY wholesale power and ONLY to utilities?

    so the only way FB could get power was through Dominion?

    why can’t FB buy wholesale from PJM…

    you know.. this is the biggest rats nest in the history of the world….

    at least it feels like it to us dunderheads…

    now go comment on the Trump killing CPP thread, please would appreciate your take and Toms..

    I don’t see any difference.. I think DOM is going to do what it planned to do before..

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