Israel's Electricity Authority has drawn a firm line around how much of the national grid artificial intelligence and cloud infrastructure can consume, publishing the outline of new connection rules on Sunday evening after months of internal debate. The policy caps any single new data center at 200 megawatts and sets aside an additional 1,000 megawatts for the sector as a whole, bringing total allocated capacity to roughly 3,000 megawatts once existing approvals are included.
A Grid Under Pressure
The scale of the problem explains the urgency behind the decision. Noga, the state-backed company that operates Israel's electricity system, had received applications to connect data centers with a combined capacity of 27,000 megawatts - nearly three times the country's current average consumption. Faced with a wave of speculative and oversized requests, the Authority froze new connection approvals while it worked out a permanent framework. That freeze effectively forced developers, investors, and government planners into a holding pattern, with billions of shekels in potential projects suspended pending clarity.
The new cap means that some of the most ambitious proposals already filed with Noga, including projects seeking 500 megawatts and even 1,100 megawatts, will not proceed as designed. For a sense of scale, a single 200-megawatt facility draws power comparable to a mid-sized Israeli city and typically costs more than NIS 4 billion to build.
Guarding Against Speculation
Beyond the capacity ceiling, the rules target a more subtle risk: developers reserving grid connections for projects unlikely to ever be built, then trading or sitting on that reserved capacity. To discourage this, the Authority will require financial guarantees of NIS 2 million per megawatt requested, a sum steep enough to filter out non-serious bids. Data centers will also be required to install mechanisms allowing them to be disconnected from the grid during periods of extreme demand, giving Noga a safety valve when supply runs tight.
The Authority has framed the policy in competitive terms, suggesting it will place Israel among the world's leading countries in server-farm capacity relative to overall electricity consumption. The approved volume would represent close to 20% of Israel's projected electricity use by 2030, a striking share for a single industrial category.
Gas Prices and Generation Capacity Loom Large
The timing is not incidental. The decision arrives amid warning signs about Israel's natural gas supply, which underpins most of its electricity generation. A planned gas deal involving NewMed and Ratio, both partners in the Leviathan reservoir, recently collapsed. Gershon Berkovitz, legal adviser to the Israel Electric Corporation, cautioned last June that gas prices could climb and that weak competition in the domestic market risked pushing the system toward what he described as a point of failure to meet the state's energy needs.
Capping data center connections does not resolve that underlying tension. Even with new limits in place, Israel's overall demand for electricity will keep rising, driven by population growth, electrification of transport, and the broader digital economy alongside data centers themselves. The grid restrictions buy time and impose order, but they do not substitute for the harder task of expanding generation capacity and securing stable, competitively priced gas supplies.
What Comes Next
The full regulatory text is expected within days, opening a three-week public consultation period during which developers, utilities, and other stakeholders can submit objections or suggested amendments. The Authority has signaled it may revise the rules based on that feedback before they take legal effect. For an industry that has been waiting in limbo since the connection freeze began, the consultation window represents the last real opportunity to shape how Israel manages the collision between its ambitions as a technology hub and the physical limits of its power infrastructure.