Amazon’s giant solar power plant will lighten the environmental footprint of the company’s growing cluster of Northern Virginia data centers. It won’t do much to lighten the tax burden of Accomack County.
by James A. Bacon
Amazon Web Services (AWS), the cloud-services business unit of retailing giant Amazon, made big energy news earlier this month when it announced plans to build an 80-megawatt solar generating plant in Accomack County. The nearly 1,000-acre facility will be one of the biggest solar power plants east of the Mississippi, generating enough electricity to power 15,000 homes or, to use a more appropriate unit of comparison, about 200,000 servers.
AWS was tight-lipped about the project, declining to answer questions posed by Bacon’s Rebellion and binding business partners such as Dominion Virginia Power and A&N Electric Coop on the Eastern Shore to non-disclosure agreements. All the company was willing to say in its press announcement, above the sparest details, was that the electricity will be delivered into the electric grid through a Power Purchase Agreement (PPA) to serve “both existing and planned AWS datacenters in the central and eastern US.”
“We continue to make significant progress towards our long-term commitment to power the global AWS infrastructure with 100 percent renewable energy,” said Jerry Hunter, Vice President of Infrastructure at Amazon Web Services. “Amazon Solar Farm US East … has the added benefit of working to increase the availability of renewable energy in the Commonwealth of Virginia.”
Neither the Governor’s Office nor the Virginia Economic Development Partnership issued its own press release — highly unusual in a deal reported by the Richmond Times-Dispatch to be valued at $200 million, surely one of the biggest investments by an out-of-state company in the Old Dominion this year. The deal was shrouded in secrecy. Even the state’s solar energy expert, Ken Jurman with the Department of Mines, Minerals and Energy, was kept out of the deal-making loop. “You probably know as much about it as I do,” he told Bacon’s Rebellion.
Too bad nobody’s talking because there is a fascinating back story here: the rapid rise of Northern Virginia as the leading locus of AWS data centers in the United States. According to a Greenpeace investigation of the Amazon cloud, AWS has publicly admitted to more than 10 data centers in its US East “Availability Zone,” but based on diesel permits for backup generators filed with the Virginia Department of Environmental Quality (DEQ), the total number of AWS data centers operating or under construction in Virginia stood at 23 in May.
Regarding 2014 energy consumption, said Greenpeace, “AWS expanded the capacity of US East by over 200 MW (megawatts), as much as the total amount of capacity in the rest of its U.S Availability Zones combined, bringing the total energy demand capacity of AWS facilities in Northern Virginia to 500 MW.”
AWS is under heavy pressure from environmental organizations to conserve energy or find zero-carbon emission sources for its energy-chugging server farms. If Greenpeace’s estimates are anywhere near accurate, the Accomack facility will supply only a modest fraction of the company’s total power consumption in Northern Virginia. AWS’s commitment to go 100% renewable suggests that the company could be on the prowl for significant additional solar capacity in the Mid-Atlantic region.
Meanwhile, the company is using the caché of the East Coast’s largest solar facility to drive a hard bargain with local government.
Accomack officials are excited about AWS’s decision to locate in the county, whose economic base is primarily farming, agribusiness and tourism. “This puts an Amazon-branded facility in our county,” beams Steven B. Miner, county administrator of Accomack County. But, he adds, “They’ve made it very clear that these [solar] projects are very sensitive to taxation.” Tax concessions are expected from the county.
Big data needs a home
Northern Virginia has the largest cluster of data centers in the world, and Loudoun County the largest percentage — about 80% — of any jurisdiction in Northern Virginia. Buddy Rizer, director of economic development for Loudoun County, says there are “sixty or so” data centers in Loudoun County at the moment. The number is always changing because “there hasn’t been one day in without data center construction in six years.” All the major players have a presence in Loudoun, he says. “Facebook has their largest footprint anywhere in the world here. … Visa has its main credit card processing plant here. You swipe your credit card anywhere in the world, and it’s using our infrastructure here in the county.” So dominant is Loudoun, he says, that 70% of the world’s Internet traffic moves through the county.
The need for data centers will only increase as the economy evolves toward the use of “big data” and the “Internet of Things.” Business enterprises are collecting more data than ever before, and they need to house it somewhere. Increasingly, companies are outsourcing the ownership and management of servers to “the cloud,” where companies like Amazon Web Services, Google, IBM, Microsoft and other companies can use economies of scale to store the data at less cost than most companies can themselves.
Why are so many data centers clustering in Northern Virginia? Rizer provides several reasons. One is access to high-capacity fiber-optic cable — Northern Virginia has one of the densest cable clusters in the world. Another is a regional workforce steeped in the IT skills required by data centers. Yet another is a reliable supply of reasonably priced electricity.
Also, Loudoun County targeted the sector as an economic development priority before any other jurisdiction. As a result, the county has moved further up the data center learning curve. Local government has put into place a special zoning category for data centers and has built a water-reclaiming plant that filters and treats non-potable water used for the chillers and cooling equipment required to dissipate the heat generated by all those servers.
“We have expertise throughout the government. We get data centers done faster than anywhere else in the world,” says Rizer. Companies can get data centers built in Loudoun in 13 months. “Some places in California, you can’t even get your plans reviewed in 13 months!”
The push for green data centers
As data centers proliferate, environmental groups have been paying closer attention. In 2013, writes Pierre Delforge with the National Resources Defense Council (NRDC), U.S. data centers consumed an estimated 91 billion kilowatt-hours of electricity, roughly the annual output of 34 large coal-fired power plants. Data center electricity consumption was projected to increase to roughly 140 billion kilowatt-hours by 2020, or the equivalent of 50 power plants. For environmentalists, that’s a problem because coal- and gas-fired power plants emit large quantities of carbon dioxide, implicated in global warming.
Not all data centers are created equal. Industry leading data centers, which enjoy economies of scale and embrace best practices, are far more energy efficient than smaller corporate data centers. “The vast majority of data center energy is consumed in small, medium, and large corporate data centers as well as in the multi-tenant data centers to which a growing number of companies outsource their data center needs,” writes Delforge. “These data centers have generally made much less progress than their hyper-scale cloud counterparts.”
The simple act of shifting data storage from in-house to hyper-scale cloud computing can reap tremendous gains in economic and energy efficiency, writes Jeff Barr in the Amazon blog.
For starters, cloud customers require fewer servers to store the same amount of data. On-premises servers usually have low utilization rates — company IT departments have to maintain enough capacity to handle peak demand, plus a reserve, in order to prevent the loss of mission-critical functionality. Typically, server utilization runs less than 20%. When a company switches to the cloud, a pool of customers can balance out each others’ peak demand. Utilization can run around 65%. In other words, Barr contends, an AWS or other state-of-the-art provider can support the same amount of data with one-fourth the number of servers.
Additionally, large-scale cloud providers can better afford to invest in efficiency improvements. Industry leaders report a Power Usage Effectiveness (PUE) rating as low as 1.07, meaning that only 7% of the electricity is lost in distribution, cooling, lighting and other overhead. The industry average is 1.7. The difference between the industry average and state of the art represents more than 30% of data-center electricity consumption.
NRDC is pushing for corporations to achieve greater energy efficiency by adopting common performance metrics, developing “green lease” contract templates and making transparent their energy efficiency performance. “If just half of the technical savings potential for data center efficiency that we identify in this paper were realized,” writes Delforge, “electricity consumption in U.S. data centers could be cut by as much as 40 percent … — equivalent to the annual electricity consumption of nearly all the households in the state of Michigan.”
But that’s not all. Environmentalists are pressuring data centers to embrace green energy sources, in particular solar power. In a 2014 report, Greenpeace ranked AWS as the second least green of 14 major cloud brands. Stated the report:
Amazon Web Services (AWS), which provides the infrastructure for a significant part of the internet, remains among the dirtiest and least transparent companies in the sector, far behind its major competitors, with zero reporting of its energy or environmental footprint to any source or stakeholder.
In November 2014, AWS committed to achieving 100% renewable energy usage for its global infrastructure footprint. In January, the company announced plans for a 150-megawatt wind farm in Benton County, Indiana. In April, it announced a pilot of Tesla’s energy storage batteries in its California operations. And in June, it announced the Accomack County solar plant. The company’s goal is to reach 40% renewable energy by 2016.
Environmentalists are holding the company’s feet to the fire, demanding more transparency. Gary Cook, writing for Greenpeace, which has been benchmarking performance of data center operators since 2010, said in May:
Despite its market leading position among cloud providers, Amazon has long kept Amazon Web Services (AWS) operational details inside the proverbial black box, keeping details of its size and scale hidden even from its own investors until just this past month. While Amazon has finally provided more specific financial details [it remains] among the least transparent companies with regard to its environmental footprint, lagging far behind what Apple, Google, IBM and nearly every other company in our 2015 evaluation provides.
Angling for tax breaks
AWS has been working behind the scenes to bolster its commitment to green energy for some time — even before it announced its commitment to a 100% goal. In December 2014, only a month after announcing the goal, the company was far enough advanced in its plans to develop the Accomack County site that it submitted its conditional use permit to the county planning commission. That followed a lengthy period in which the company had worked with county officials to assemble about 44 parcels or parts of parcels to create a 900-acre block of land.
Plans call for developing 440 acres, with 200 acres directly under solar panels. The company promised no noise and no emissions, and said it will cordon off the facility with fencing and landscaping. Construction will create 400 to 600 jobs, although the plant itself will support only four or five full-time jobs, mainly to maintain landscaping around the panels.
One advantage of the Accomack site is that it allowed easy connection to a Delmarva Power transmission line that tied into the PJM Interconnection network of power grids. PJM, a regional transmission organization, operates a wholesale electricity market in the Mid-Atlantic, facilitating the buying and selling of electricity between utility companies and independent producers. Through PJM, Amazon Web Services could, in effect, connect with its servers in Dominion-based territory in Northern Virginia. A&N Electric Coop, the cooperative serving Accomack County, is not involved in the project in any meaningful way.
For all of Accomack’s advantages, AWS stressed that it was “very concerned about the tax consequences,” of the deal, says County Manager Miner. Negotiations between the company and the county focused on how much of a real estate tax break to give the company, and how the company could offset that sum with proffers.
Accomack’s tax rate (outside Chincoteague) is $0.58 per $100 of assessed value. Brent Alderfer, president of Community Energy, AWS’s partner in constructing and operating the facility, described the project as “roughly $200 million” in comments to the Richmond Times-Dispatch. Alderfer did not respond to a Bacon’s Rebellion interview request. That figure, if accurate, implies an upper bound of $1.1 million in tax liabilities to the county. In all likelihood, the liability would be lower because not all of the $200 million will be spent on land, facilities and equipment.
A calculation by county assessor Brent Hurdle placed the total taxable land value at $17.2 million, yielding $99,800 in revenue. That represented a considerable increase from its previous assessment as farmland at $2.6 million generating $15,000 in taxes. Hurdle’s valuation placed no value on the tens of millions of dollars of solar panels.
No final assessment has been determined, however, Miner says. He expects a proposal to be put before the board next month. “We’re confident we can come up with a fair solution.”
While making it clear that he supports the AWS project, Miner contrasted the modest tax benefits of solar with those of a peak-power plant built previously in the county that revved up seven jet turbines during periods of peak demand to sell electricity into the grid. “That gave us a good wallop of revenue.”
In an economic impact analysis, James G. Brierlein, a professor of agriculture and economics at Pennsylvania State University, summarized the economic benefits to the county as follows:
- $250,000 in up-front proffers. (According to Miner, these include a donation of solar panels for county buildings and funds to clean up abandoned homes and structures throughout the county.)
- $1.4 million in annual benefits to the county, assuming $100,000 in tax revenues and including $740,000 in annual lease payments to the property owners.
- $20 million in economic stimulus, counting money spent on construction and the multiplier effect in the local economy.
If Northern Virginia continues to attract new data centers — and Loudoun County’s Buddy Rizer expects the trend to last at least through 2020-2021 — and if environmentalists pressure the data-center giants into greater renewable energy commitments, AWS and its competitors could be on the prowl for more locations for solar facilities in the PJM interconnection grid. The Accomack solar plant could be the first of many in Virginia, and the project could set a precedent for terms of future deals.
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