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Episode #177: "Powering Data Center Alley" with David Schleicher, President & CEO, Northern Virginia Electric Cooperative [an Energy Central Power Perspectives™ Podcast]

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Powering the growing electricity demand from data centers represents one of the fastest-growing energy needs in the utility sector these days. The DC suburbs and the Northern Virginia, known as "Data Center Alley," has become among the nation's most notable hubs for these massive facilities. Joining the Energy Central Power Perspectives Podcast to dive into what it means to provide power to these facilities popping up at an increasing rate, while still keeping the traditional ratepayers happy with reliable and affordable power, is David Schleicher, President and CEO of NOVEC (Northern Virginia Electric Cooperative).

Listen in as David shares with podcast host Jason Price and producer Matt Chester the details of how NOVEC is adapting to this rapid expansion while continuing to meet the expectations of its traditional residential and commercial customers. He also shares insights into NOVEC’s strategies for maintaining reliability, promoting energy efficiency, and integrating renewable energy sources, all while staying true to the cooperative’s mission. Whether you’re interested in the future of data centers, energy management, or cooperative utilities, this episode offers a deep dive into the evolving landscape of energy distribution.

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Thanks to the sponsor of this episode of the Energy Central Power Perspectives Podcast: West Monroe

 

Key Links:

David Schleicher's Energy Central Profile: https://energycentral.com/member/profile/david-schleicher-0/about

Ask a Question to Our Future Guests: Do you have a burning question for the utility executives and energy industry thought leaders that we feature each week on the Energy Central Power Perspectives Podcast? Do you want to hear your voice on a future episode? Well starting in 2024, we’re offering you that opportunity! Head to this link where you can leave us a recorded message, including a question you’re eager to have answered on a future episode of the podcast. We’ll listen through them, pick out the right guests in our upcoming lineup to address them, and you’ll hear yourself as a part of the conversation! Energy Central on SpeakPipe: www.speakpipe.com/EnergyCentralPodcast 

 

TRANSCRIPT

Jason Price:

Data centers are big business. Most data centers are located in major urban areas in Virginia, Georgia, Texas, and California. As land becomes more expensive, these data centers are now being located in less populated rural locations leading to coveted economic development, widespread adoption of AI and cloud-based computing is driving this growth.

Much of the power to run these massive load centers comes from your local utility. How can a utility keep up with a new load demand, promote energy efficiency, drive clean energy, and continue to upgrade and modernize the grid while keeping costs affordable, accessible, and reliable?

On today's episode, we're going to take you to one of the largest concentrations of data centers in the world to Northern Virginia, commonly referred to as Data Center Alley and find out how not an IOU or a Muni, but is a local electric cooperative that is fulfilling its obligation to serve while staying true to its nonprofit mission. Next, on Energy Central's Power Perspectives podcast.

Matt, a massive shift is underway with data centers quickly becoming the dominant customer base for utilities, can you share with us what you are seeing about this trend from the Energy Central community?

 

Matt Chester:

Sure, Jason. And on Energy Central, just like everywhere else in the world of energy, the topic of data centers and their impact to the power sector, it's been trending for some time now. And from what I've gleaned from the Energy Central community data centers and their energy consumption, no matter where they are geographically, it's creating both challenges and opportunities for the utilities that serve them.

And so in particular, members of our community have been discussing how utilities can leverage smart technology, AI-driven demand forecasting and partnerships with renewable providers to try to find creative ways to meet that growing power demand while also pushing for overall efficiency, sustainability and reliability.

And this shift, it's not just about keeping the lights on, it's about driving innovation and community development in these new data center hubs. And those are the types of themes that I'm hoping to learn more about in today's conversation.

 

Jason Price:

Thanks, Matt. And thank you to West Monroe, our sponsor of today's show. I'm Jason Price, energy Central podcast host and director with West Monroe coming to you from New York City. And with me as always, from Orlando, Florida is Energy Central producer and community manager, Matt Chester.

And we are excited to welcome today's guest to the episode Schleicher, the president and CEO of NOVEC, the Northern Virginia Electric Cooperative, Dave Schleicher. Welcome to the Energy Central Power Perspectives Podcast.

 

David Schleicher:

Good morning Jason and Matt, my pleasure to join you.

 

Jason Price:

Dave, we're thrilled to have you here. I want to start by making sure we're all on the same page about NOVEC's business structure. What does it mean to be a distribution cooperative compared with an investor-owned utility, and how does this influence your approach to energy procurement and customer service?

 

David Schleicher:

So as a member-owned not-for-profit or electric distribution cooperative, NOVEC is focused on providing safe, reliable and affordable energy to our members or our customers. As a distribution cooperative, we have no bulk electric transmission facilities and our only generation is a 49 megawatt biomass plant, which burns renewable forest waste from the lumbering industry.

The resounding message from our customers, our members, is to keep the lights on and to keep the bills low. NOVEC is very proud of 99.99% reliability, and we currently have the lowest residential rates among regulated electric utilities in Virginia. The not-for-profit cooperative part that you mentioned means that our margins or profits at the end of the year are allocated back to our members who used energy during that year.

So our customers are our members who are also our owners owning an equity position in the cooperative based on their allocation of margins. And we're governed, I'll add, by a member-elected board of directors.

 

Jason Price:

Okay. And in this day and age, all stakeholders across the grid seem to be constantly juggling the various priorities that I mentioned earlier of affordability, reliability, and sustainability among others. So what's the NOVEC approach when it comes to striking the right balance here?

 

David Schleicher:

NOVEC customers are absolutely no different and Northern Virginia is a very affluent and well-educated service territory. So maybe they rise above even the average customer in terms of expectations of their utility. And you are very correct to say it's a balancing act.

As I noted earlier, we feel we check the boxes on reliability and affordability, but we're always looking to get better by addressing outage-vulnerable areas to make sure our members have access to energy efficiency and energy-saving information such as our advanced metering data. Our biomass plant is a great example of using forest waste in southern Virginia to generate electricity.

NOVEC has also contracted with utility-scale solar developers and just signed contracts for 40 megawatts of battery storage to help us manage peak demands. Most of our energy purchases come from the PJM marketplace. So if you look on the PJM website, you'll see solar, wind and nuclear are about 35% of their portfolio and is carbon-free, while natural gas consistently makes up about 50% of the portfolio.

While NOVEC will look to expand the renewable portion of our portfolio, we'll do so in a financially responsible manner. We currently do not have any renewable or carbon-free mandates from regulators or state government and no corporate targets as well.

 

Jason Price:

Okay. I want to dig into the data center discussion. So as I mentioned in the intro, NOVEC is in data center alley. This region of Greater DC and Northern Virginia has expanded rapidly in the past decade due to the tech boom. So talk to us about that evolution and how and why did it happen?

 

David Schleicher:

So Northern Virginia, as you can tell on the map, is directly adjacent to the Washington DC metropolitan area, which means we are always growing and somewhat recession proof. The Ashburn area of Northern Virginia was one of the original hubs of the internet.

And between the federal government, defense contractors and educational institutions all have critical internet requirements for speed and redundancy. This function has always been here and NOVEC had our first AOL data center served about 20 years ago. But with the move to cloud, increased use of digital devices and now AI, the growth rate is exponential.

 

Jason Price:

Okay, so let's just understand here, you were predominantly serving residential and commercial customers, but this growth has forced the market to flip in some respect so that the low demand is now shifted to these immense data centers. So can you elaborate on any of the challenges that arise from balancing the needs of these two vastly different customer groups?

 

David Schleicher:

Certainly, and you're correct. Residential subdivisions, shopping centers and planned communities have been our growth engines since the 1990s. We grew consistently at greater than 5% annually, but as available land has become more scarce, homes and townhouse is smaller, our growth rate has decreased.

Also, homes have become more energy efficient. Residential sales growth is now closer to one, maybe 2% lower than the rate of inflation and with some sensitivity to weather. What we're now seeing with data centers, our energy sales growth in excess of 15% per year and that load is served generally via large dedicated substations, not underground distribution infrastructure to homes.

Data center reliability is generally not impacted much by storms, falling trees, motor vehicle accidents, or even squirrels. So we need to keep an eye on reliability for our legacy customers while building out all of this new infrastructure.

We wanted to light all of our customers, which begins by recognizing they have different drivers of satisfaction. I'll also add that this change has had us pivot our workforce. So the workforce skills needed to serve data centers is somewhat different than the workforce skills to serve residential customers. So we've had a workforce pivot as well.

 

Jason Price:

I'm sure you did. So how about this, walk us through the process of getting one of your data center customers online. Does it look different based on the size, location, or customer and what's the timeline from project planning to then fully being on the grid?

 

David Schleicher:

That's a question we get daily, so happy to answer that one. NOVEC has taken great strides in the last couple of years to refine and standardize the process for serving data centers. Data centers have actually been appreciative of the new process and structure.

We require data centers to have approved zoning, site plans and local government approval. We require a construction schedule and a load ramp. We also require periodic payments to cover our costs. In some cases, this separates serious inquiries from speculative inquiries. We have a standard template and topology for our substation and in most cases require that substation to be on the data center parcel.

We've staffed up a project management and construction management team to handle the cadence of a project and to keep all parties accountable for making their dates. From first submission to substation energization, right now it's taking about four to five years that's driven largely by local permitting requirements and procurement of long lead time material.

A 150 MVA power transformer takes from 40 to 48 months to order and deliver. The data center buildings can often be completed in 24 to 30 months. So that mismatch is constantly being worked on to improve our planning and scheduling skills.

 

Jason Price:

Dave, that was really helpful. Now let's dig a bit further into this. Describe to us who owns the infrastructure, some of the ballpark costs associated with the building of the infrastructure, and how is that infrastructure cost recovered? Give us an idea of basically what this all means for a data center and NOVEC.

 

David Schleicher:

Certainly, as I indicated in my last answer, we do require data centers to make periodic payments and those payments, over the life of designing, planning, constructing, commissioning, the substation, we recover contribution and data construction from the data center customer.

That capital investment on behalf of the data center customer means that once they go into service, their rate schedule for service from NOVEC is largely recovering just operating and maintenance costs because the capital cost has already been funded by the data center ahead of time. That methodology helps us de-risk the incumbent members of NOVEC from taking on such a large capital investment.

 

Jason Price:

How are the communities with these data centers reacting to these changes? You mentioned the real estate prices and such. Do they welcome them into the area or is there pushback from what it might mean to their relations with NOVEC and the wider grid?

 

David Schleicher:

So another great question and the answer clearly depends on who you ask. If the data center is 200 feet from your home and now occupies what was an open field, you may have one opinion. If you just got offered a million dollars an acre for your land, your answer might be different.

So data centers, just like any other land use, those siting decisions rest with local government, not the electric utility. NOVEC does not actively market or seek out data center development. If local government approves the siting of data centers as part of its comprehensive land use plan, then NOVEC will serve them just like we've served any other load.

 

Jason Price:

That's a very practical response and a very human response. I mean here being in Manhattan, same thing. You got a rundown building tenant doesn't want to move out, developer presents some options and the attitude perhaps could change. So we see this all the time everywhere.

I want to ask you about the affordability for a moment. By taking on such immense data center power loads and there's some large monthly utility bills, what sort of financial risks does that bring up? Should the data center end up going out of business after you've adjusted to that revenue source?

 

David Schleicher:

Certainly, NOVEC has always prided itself on being very financially stable with a strong balance sheet. But you're correct. The customers with monthly bills approaching $5 million do pose a risk. We have a very robust risk management plan to make sure we have sufficient protection. There are many different kinds of data centers in this industry and we modify our approach to each one.

Some of the companies we deal with, quite honestly, the world will end before they go bankrupt, but you can never be too careful. NOVEC has also moved some accounts to weekly billing. So the traditional thirty-day monthly bill has now been reduced to weekly billing to improve cash flow stress on both parties.

 

Jason Price:

Dave, looking ahead, what do you see as the biggest challenges and opportunities for NOVEC in navigating the growing demands of data centers and maintaining service for your residential customers? Are there any currently unexplored technologies or strategies that you can see coming into play in the coming years?

 

David Schleicher:

Sure. NOVEC has 180,000 customers with almost a billion dollars in equity in our company. We need to take great care of both incumbent customers and new customers. NOVEC is implementing an advanced metering project. We're improving call center telephony. We improving storm management processes, addressing pockets of poor reliability.

NOVEC began using satellite imagery last year to better address danger and dying trees. We're also adding a drone program to our strategic plan in 2025 as a cooperative. Serving our communities is a core value and NOVEC is very involved both financially and volunteer time at food banks, military veteran organizations and youth education events.

 

Jason Price:

It's a remarkable balance that's on your shoulders and it seems like your team is doing a great job. A lot of risk and a lot of need and demand going on in your jurisdiction and being a cooperative, it's very impressive. It's an impressive story and I really appreciate you taking time to share some of this insight with us. I'm sure you're got a full load of busy day and thank you again for taking time out.

Dave, we're going to give you the final word, but we want to pivot now to what we call the lightning round, which gives us an opportunity to learn a little bit more about you, the person rather than you, the professional. We're going to throw a bunch of questions at you. We ask you for one word response or one quick phrase. So Dave, are you ready?

 

David Schleicher:

I'm ready. Let me have it.

 

Jason Price:

All right, let's take it away. What's your ideal way to spend a day off?

 

David Schleicher:

What's a day off? I'm saving that for the near future.

 

Jason Price:

Got it. Okay. Best vacation spot you've ever visited.

 

David Schleicher:

Really have to go with Aruba. Just love the climate, love the culture. I'll go with Aruba.

 

Jason Price:

If someone is visiting the DC or Northern Virginia area, are there any hidden gems you'd recommend they check out outside of the most popular tourist spots?

 

David Schleicher:

The great part of Northern Virginia is you've got monuments and museums to the east and you've got waterfalls and hiking to the west. If you like crowds and traffic, you can go to the east and if you like open space and solitude, you can go to the west.

So lots of hidden gems, but the best part of Northern Virginia is if you go east, you got one part of the world and if you go west, you got a completely different part of the world. So we sit, sit right on that dividing line. It's a beautiful place to live.

 

Jason Price:

Interesting. All right, Dave, we're collecting lightning round questions from past podcast guests to ask future guests. So we recently had Arch Rao of Spand on the podcast and this question for a future guest was this, what is the most impactful thing you did this year to positively impact climate change?

 

David Schleicher:

Well, it may not be super positively impactful, but I selected a Tesla as my company car. It makes me a role model to employees and neighbors and puts the example out there of using a carbon-free transportation source. Though I have to admit, I'm still getting used to it on longer trips.

 

Jason Price:

Yeah. All right, now it's your turn. What lightning-round question related to energy or off the wall, do you want to challenge a future guest to answer?

 

David Schleicher:

I would ask other leaders, what have you done or what have they done to pass on the legacy of their knowledge and their experience in this most vital industry to the next generation of leaders.

 

Jason Price:

Nice. And Dave, last question. What are you most passionate about?

 

David Schleicher:

I think this is an answer that comes from the people I work with as much as from me, but it's showing up each day and never giving up. Some days and some problems are harder than others, but they generally don't get better with time or with procrastination. So you need to muster your smart people and get things done.

 

Jason Price:

Nicely stated. All right, and as I said, Dave, we're going to give you the final word. So knowing that the audience on Energy Central Power Prospectives are members of your industry and the audience of peers and the C-suite listening in, so what is the one piece of advice for them, particularly if the rise in data centers is newer to them, compared with what you've had to deal with? What would you share as today's lasting message?

 

David Schleicher:

I would say to them embrace the challenge. There is plenty of room for electric utilities of all sizes and scopes to be successful in serving this emerging market. Be smart. Make your people be smart. Don't be overwhelmed or intimidated by big data center customers. Instead, build respectful personal relationships at all levels of the organization.

I talked to six or eight data center CEOs on a regular basis. We all have each other's phone numbers. We stick to CEO topics, we let our engineers stick to engineering topics, but we're always just a phone call away. So embrace the challenge and build respectful relationships with your customer.

 

Jason Price:

That's great. Thank you very much for sharing this. Dave, I want to thank you for taking the time. I know you're a busy man, a lot going on in your territory, a lot on your plate. Thank you for sharing this insight. I'm sure we're going to get a lot of questions and comments and follow up and definitely stay engaged with the Energy Essential podcast community where you can keep the conversation going.

Until then though, we just want to thank you for sharing your insights and make sure you come back and maybe check in a year from now and find out what else is new and exciting in your territory.

 

David Schleicher:

My pleasure and always happy to help others climb the learning curve.

 

Jason Price:

And like I said, you can always reach Dave through the Energy Central platform where he welcomes your questions and comments. And we also want to give a shout out of thanks to the podcast sponsors that made today's episode possible.

Thanks to West Monroe. West Monroe is a leading partner for the nation's largest electric gas and water utilities working together to drive grid modernization, clean energy and workforce transformation. West Monroe's Comprehensive Services are designed to support utilities in advancing their digital transformation, building resilient operations, securing federal funding, and providing regulatory advisory support.

With a multidisciplinary team of experts, West Monroe offers a holistic approach that addresses the challenges of the grid today and provides innovative solutions for a sustainable future. And once again, I'm your host, Jason Price. Plug in and stay fully charged in the discussion by hopping into the [email protected]. And we'll see you next time at the Energy Central Power Perspectives Podcast.

 

About Energy Central Podcasts

The ‘Energy Central Power Perspectives™ Podcast’ features conversations with thought leaders in the utility sector. At least twice monthly, we connect with an Energy Central Power Industry Network community member to discuss compelling topics that impact professionals who work in the power industry. Some podcasts may be a continuation of thought-provoking posts or discussions started in the community or with an industry leader that is interested in sharing their expertise and doing a deeper dive into hot topics or issues relevant to the industry.

The ‘Energy Central Power Perspectives™ Podcast’ is the premiere podcast series from Energy Central, a Power Industry Network of Communities built specifically for professionals in the electric power industry and a place where professionals can share, learn, and connect in a collaborative environment. Supported by leading industry organizations, our mission is to help global power industry professionals work better. Since 1995, we’ve been a trusted news and information source for professionals working in the power industry, and today our managed communities are a place for lively discussions, debates, and analysis to take place. If you’re not yet a member, visit www.EnergyCentral.com to register for free and join over 200,000 of your peers working in the power industry.

The Energy Central Power Perspectives™ Podcast is hosted by Jason Price, Community Ambassador of Energy Central. Jason is a Business Development Executive at West Monroe, working in the East Coast Energy and Utilities Group. Jason is joined in the podcast booth by the producer of the podcast, Matt Chester, who is also the Community Manager of Energy Central and energy analyst/independent consultant in energy policy, markets, and technology.  

If you want to be a guest on a future episode of the Energy Central Power Perspectives™ Podcast, let us know! We’ll be pulling guests from our community members who submit engaging content that gets our community talking, and perhaps that next guest will be you! Likewise, if you see an article submitted by a fellow Energy Central community member that you’d like to see broken down in more detail in a conversation, feel free to send us a note to nominate them.  For more information, contact us at [email protected]. Podcast interviews are free for Expert Members and professionals who work for a utility.  We have package offers available for solution providers and vendors. 

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