Top Economist Spars With Electricity Authority Over Server Farm Power Needs

A sharp dispute has erupted between Professor Avi Simhon, head of Israel's National Economic Council, and Amir Shavit, chairman of the Electricity Authority, concerning government policy on establishing server farms and the electricity grid's capacity to meet their immense projected demand. Simhon accused the regulatory bodies of creating significant obstacles, stating the Electricity Authority is "completely running wild and ignoring government decisions." This comes after the Electricity Authority and Noga, the electricity system operator, unusually halted new applications for server farm connections in July due to their enormous scale. The pending applications represent a demand for 27,000 megawatts, nearly triple the average consumption of the entire economy. Speaking at an energy and economy conference, Simhon alleged that the Electricity Authority and the Treasury's Budget Department are using regulatory hurdles to block server farm development, contradicting government directives. Shavit, also present, vehemently dismissed Simhon's remarks as "nonsense" and his proposals as "populist."

The core of the conflict revolves around how the electricity sector can support the widespread establishment of server farms, driven by the surge in computing power needed for artificial intelligence applications. Energy Minister Eli Cohen stated at the conference that the goal is to allocate about 20% of Israel's electricity consumption to server farms, a target Simhon presented as a decision by elected officials against a conservative approach by civil servants. Simhon argued that the government's role is to ensure supply, not limit demand. He specifically criticized the Electricity Authority's stance that server farms building their own generation facilities must rely on renewable energy, which he sees as an effective blockade. Simhon recounted a proposal from a major company to the Prime Minister to import turbines, purchase gas, and generate its own power within a year, a plan he claims was opposed by the Electricity Authority and Budget Department, who insisted such land be used for national grid power stations.

Simhon countered that the government has already approved power plant expansions expected to increase Israel's production capacity by 20-25% by 2030-2031. Shavit refuted this, asserting that the Electricity Authority itself proposed allowing server farms to consume up to 20% of electricity, with the Energy Minister's support and coordination with the AI headquarters. "I will not address the rest of the nonsense that was said," Shavit stated. He added that relying on server farms to build their own power plants would delay their establishment by over a decade. Instead, the Authority's plan relies on over 100 billion shekels in already approved and initiated investments in the electricity sector, which will enable the expansion of server farm operations in the coming years. Simhon also attacked the halt on new connection applications, arguing that many of the 27 gigawatts in submitted requests are not serious and should be filtered rather than rejected outright. He lamented the inability to remove or appoint officials, allowing the Electricity Authority to "ignore government decisions and run wild," leaving the country in "limbo."