Reprinted from the Katusa’s Investment Insights newsletter

One year ago this week, the lights stayed on in Northern Virginia by pure luck. At 7 p.m. on July 10, 2024, a single piece of equipment failed near Fairfax. Within milliseconds, data centers processing 70% of the world’s internet traffic began dropping off the grid like dominoes.

Grid operators at PJM watched their control screens flash red. Power plants had to slash output instantly. Dominion Energy held its breath as the system teetered on the edge of cascading blackouts that could have darkened the entire East Coast. We came that close to learning what happens when Google goes dark.

The North American Electric Reliability Corporation was so alarmed that they launched an emergency task force within weeks. “The grid is not designed to withstand the loss of 1,500-megawatt data centers”, it concluded.

Here’s the terrifying part: Since that near-miss, data centers have only gotten bigger. Dominion alone now has 40 GW of contracted power for data centers, up 88% since last July. By 2030, grid operator PJM expects 32 GW of increased demand on its system, with all but two of those gigawatts coming from data centers.

We’re not building infrastructure fast enough to prevent the next failure. And this time, we might not be so lucky. That lightning arrestor failure last July exposed what tech executives have been whispering about for years.

The power secret everyone knows but won’t talk about

Ask any tech executive about their biggest fear, and after a few drinks, they’ll tell you the truth. It’s not competition. It’s not regulation. It’s electricity.

Training a single large AI model burns through 1 gigawatt-hour of electricity. That’s enough to power 1,000+ American homes for a month. The math is terrifying. By 2028, data centers will consume up to 12% of total U.S. electricity, up from 4.4% in 2022. In six years, your ChatGPT queries and Netflix binges could use more power than the entire state of New York.

For half a century, U.S. electricity demand grew at a sleepy 2-3% a year. Today, it’s exploding at 20-25% annually. That’s 20 gigawatts of new capacity needed every year, an entire Portugal’s worth of power generation.

Look at this projection and tell me we don’t have a problem:

But here’s the kicker: All that data, every Google search, every Instagram post, every Zoom call has to physically travel somewhere. And for 70% of global internet traffic, that somewhere is a nondescript “parking lot” in Virginia Beach.

The most valuable real estate nobody’s heard of

Most people have no idea that 70% of the world’s internet traffic flows through Northern Virginia. It started innocently enough. A few data centers popped up near Washington D.C. in the 1990s, close to government agencies, good fiber networks and stable power. Nothing special.

Fast forward to today: Northern Virginia runs about 6,000 megawatts of data center capacity. That’s enough electricity to power six million homes running everything at once. The region has more data centers than the next three largest U.S. markets combined.

Drive down General Booth Boulevard in Virginia Beach, and you’ll pass what looks like the world’s most boring office park with no signs and no logos. Just some squat concrete buildings behind serious fencing. What’s hidden inside changes everything.

Inside those buildings, massive underwater cables surface after crossing entire oceans, Microsoft and Meta’s lines from Spain, Google’s from France, Latin America’s digital economy flowing through fiber from Brazil. This is where the cloud actually touches the ground.

From this landing point, 20 miles inland, that data hits Northern Virginia’s data center cluster. That’s 51 million square feet of servers, cooling systems and backup generators. It’s the largest concentration of computing power on Earth.

When geography becomes destiny

This didn’t happen by accident. Northern Virginia had three things Silicon Valley didn’t: proximity to government agencies (early cloud adopters), cheaper land and, crucially, access to massive power generation. But now those advantages have become a bottleneck.

Dominion Energy, the regional utility, just announced a five-year waiting list for new large power connections. So, if you want to build a data center in the world’s data center capital today, you’ll get power in 2030. Maybe.

That’s why Microsoft just agreed to pay Constellation Energy to restart Three Mile Island — yes, that Three Mile Island. They’re so desperate for reliable power, they’re bringing back a nuclear plant that’s been shut down since 2019.

Government policy is making it worse. It takes 5-10 years to approve new transmission lines. Environmental reviews for power plants can take even longer. Meanwhile, AI companies needed power yesterday. This desperation for power is creating a fundamental shift in how we measure economic dominance.

The electro-dollar emerges

For a century, controlling oil meant controlling the global economy. But something fundamental has shifted. Look at this chart showing how much electricity different countries need to generate a dollar of GDP:

The U.S. has gotten dramatically more efficient, using 37% less electricity per dollar of GDP per capita than in 2013. We’re squeezing more economic value from every electron. Meanwhile, we have:

• 94 nuclear reactors (20% of our electricity)
• Natural gas reserves for decades
• The world’s most robust transmission grid

This combination creates what I call the “Electro-Dollar”, economic power backed not by gold or oil but by the ability to generate and deliver electrons where they’re needed most. And right now, they’re desperately needed in Northern Virginia.

The clock is ticking

Right now, Northern Virginia utilities are turning away billion-dollar data center projects. Not because they don’t want the business, but because they physically cannot deliver the power. Every month of delay costs tech companies millions. They’re getting desperate enough to consider everything: offshore power barges, private nuclear reactors, even laying their own transmission lines.

The infrastructure gold rush has started.

The parking lot in Virginia Beach where those cables surface? It’s about to become the most valuable real estate in America. Not because of what’s on top of it, but because of what flows through it and, more importantly, what powers it. The next great American fortunes won’t be made in code. They’ll be made in copper wire, concrete, and kilowatts.

Because when everyone realizes the internet has a power problem, it’ll be too late to buy cheap insurance.

P.S. In the just-released July edition of Katusa’s Resource Opportunities, we reveal how we’re going to position for Dominion’s $50.1 billion infrastructure buildout—and why the 88% surge in data center power contracts is just the beginning.

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