Data Center Site Selection in Virginia: Power, GS-5, Zoning and Tax Rules

Most states are still courting their first hyperscale campus. Virginia is managing the consequences of hosting the largest data center market in the world. The Joint Legislative Audit and Review Commission (JLARC) counted about 150 data center sites holding around 340 buildings in 2024, with about 80% of the industry concentrated in Loudoun, Prince William and Fairfax counties.¹ JLARC also found that data centers are the main driver of a forecast doubling of statewide electricity demand over the next 10 years, and that building enough generation and transmission to meet even half of unconstrained demand by 2040 would be difficult.¹

That concentration changes the screening order. In a new market, land, fiber and incentives are often the first filters. In Virginia, fiber and buyers are abundant near Ashburn, so the binding constraints are the serving utility’s ability to deliver power on a date, the county’s approval process and the state’s evolving tax and regulatory terms. Virginia is in PJM, so wholesale capacity prices also matter; our guides to PJM site selection and PJM capacity prices cover the regional layer, and the Northern Virginia market guide covers leasing and absorption.

Most large Virginia sites are in Dominion Energy Virginia’s territory, and Dominion’s pipeline is the clearest measure of the queue a new project joins. On its July 2026 earnings call, Dominion reported more than 53 GW of data center capacity in various stages of contracting, about 12 GW of it under electric service agreements, and more than 5 GW of new data center contracts since the end of 2025.² Nine of the Dominion Zone’s 10 highest all-time peak-demand days occurred in 2026.² A parcel near a substation is not the same as a parcel with capacity, and a will-serve conversation should start with where a new request would sit behind that backlog.

The rules for large customers also changed. In its November 25, 2025 final order in Dominion’s biennial review, the State Corporation Commission created a GS-5 rate class for customers with demand of 25 MW or more, effective January 1, 2027.³ GS-5 customers must sign 14-year commitments to pay for at least 85% of contracted transmission and distribution demand and at least 60% of contracted generation demand, even if they use less.³ The same order approved base rate increases of $565.7 million for 2026 and $209.9 million for 2027, about half of what Dominion requested.¹²

For site selection, the practical effect is that contracted megawatts become a long financial commitment. A request sized for a full build that ramps slowly carries minimum bills from the start, so a credible ramp schedule matters. Our guide to large-load tariffs and electric service agreements explains how these provisions are usually structured.

Virginia also produced the event that made grid operators treat data centers as a reliability issue. On July 10, 2024, a lightning arrester failed on a 230 kV line, and the line’s auto-reclosing scheme produced six successive faults in 82 seconds.¹³ About 1,500 MW of data center load, spread across 60 points of interconnection and 25 substations, dropped off the grid at once in a customer-initiated load loss that operators had not anticipated.¹³ NERC found that the resulting voltage rise did not threaten bulk system reliability but warned planners that similar events should not reach intolerable levels.¹³

For a new campus, expect utilities and PJM to ask more about ride-through settings, UPS transfer logic and how load returns after a disturbance. A campus that drops hundreds of megawatts in a fraction of a second behaves, from the grid’s point of view, like a large generator tripping in reverse, and planners now study that case. Those questions belong in early design, not commissioning, and our guide to NERC reliability and large loads tracks the standards work that followed.

Virginia counties control land use, and the core counties have tightened. On March 18, 2025, the Loudoun County Board of Supervisors adopted a comprehensive plan amendment and a zoning ordinance amendment that eliminated by-right data center development.⁴ New data centers now need a special exception, with public hearings before both the Planning Commission and the Board of Supervisors.⁴ Applications already under review as of February 12, 2025 were grandfathered only if they were more than 500 feet from residential areas and did not change substantially.¹⁴

Prince William County shows the litigation risk of large rezonings. The Prince William Digital Gateway, about 23 million square feet on roughly 2,100 acres next to Manassas National Battlefield Park, was approved on a 4–3 vote after a 27-hour hearing in December 2023.⁵ On March 31, 2026, the Virginia Court of Appeals unanimously affirmed a ruling that voided the rezonings because the county’s public notice for the hearing violated state law and its own ordinance.⁵ The lesson for any parcel is procedural as much as political: a rezoning is only as durable as the record behind it.

Virginia’s retail sales and use tax exemption for data center equipment requires at least $150 million of capital investment and at least 50 new jobs paying at least 150% of the local prevailing average wage. In a distressed locality, the thresholds fall to $70 million and 10 jobs.⁷ The exemption is large: Virginia forwent more than $1.6 billion in fiscal 2025, up 118% from the prior year, and JLARC found data centers received 53% of state incentive spending over the past decade.¹¹

The exemption survived a serious challenge in 2026. The House budget would have kept the 2035 sunset but added environmental and efficiency conditions, while the Senate budget would have ended the exemption on January 1, 2027.¹⁵ The 2026–2028 budget enacted on June 29, 2026 kept the exemption but imposed an electricity consumption tax of $0.011 per kWh on electricity used by data centers, capped at $600 million a year statewide.⁶ For a 100 MW campus at a high load factor, that tax is a material operating cost, so run the sales tax exemption and the new tax together in any pro forma.

Further change is likely. On September 18, 2026, Governor Spanberger signed Executive Order 22, creating a Data Center Accountability Framework built on transparency, environmental protection, affordability, clean energy and grid reliability, and workforce benefits; it bars state agencies from entering into or requiring nondisclosure agreements for data center projects.⁸ The framework also calls for ending by-right approval and requiring local approval for data centers using more than 25 MW, ending state site-development subsidies for data centers, and setting state standards for energy efficiency, water use and land impacts.¹⁶ Many of those items would need legislation, so treat them as direction, not law, and see state data center legislation trends.

Development has moved south along I-95 and into Southside. The Richmond market added about 720 MW of colocation inventory in the first half of 2025, more than any other U.S. market, as demand spilled out of the Ashburn and Sterling corridor.⁹ In Pittsylvania County, the Board of Supervisors unanimously rezoned a 946-acre tract in Ringgold to heavy industrial use for a proposed data center campus valued at $1 billion or more.¹⁰

The trade-off is real but narrower than it looks. Moving south can mean more land, lower prices and, in a distressed locality, a lower bar for the sales tax exemption.⁷ It does not escape Dominion’s system-wide supply position or the GS-5 terms, and each county sets its own zoning path. Southside tracts can also sit far from the substations that already serve large industrial load, which lengthens the line and substation work a utility must plan. Rural sites also need careful checks of route diversity, water and sewer capacity, and transmission access.

1. 01Identify the serving utility and ask where a request of your size would fall behind Dominion’s contracted pipeline.²
2. 02Size the request to a realistic ramp; GS-5 minimum bills apply to contracted demand for 14 years.³
3. 03Confirm the county process: special exception, rezoning or existing approval, and whether any approval is final and unappealed.⁴⁵
4. 04Test eligibility for the sales tax exemption, including distressed-locality status, and add the $0.011 per kWh electricity tax.⁷⁶
5. 05Plan for ride-through and load-transfer studies as part of the interconnection review.¹³
6. 06Track Executive Order 22 and 2027 legislation on water, efficiency and local approval.⁸¹⁶

Our methodology explains how we weigh these factors, and you can get a site reviewed before committing to a utility request or a rezoning.