Economic Council Chair Warns of AI Crisis Over Server Farm Blockages

Professor Avi Simhon, Chairman of the Economic Council, has issued a stark warning regarding a potential Artificial Intelligence crisis in Israel, accusing the Electricity Authority and the Budget Division of obstructing the establishment of server farms. Simhon contends that these bodies are creating regulatory hurdles contrary to government policy, despite assurances that electricity supply will not be an issue until 2031.

Simhon stated that energy is a critical global issue, especially for powering AI server farms, and that the government's role should be to ensure sufficient energy, not to regulate its quantity. He criticized the Electricity Authority's announcement to halt new applications for server farms, calling it a failure of governance if officials impose restrictions due to perceived energy shortages. This conflict, he explained, has been ongoing since last winter between the Budget Division, the Electricity Authority, and some Ministry of Energy officials who sought to impose limitations, which were opposed by the Prime Minister's Office. The Minister of Energy, however, has firmly supported encouraging server farm development.

According to Simhon, the government intends to allocate up to 20% of the electricity supply to server farms, a target he described as ambitious. He contrasted this with the much lower target of 2% favored by officials in the Ministry of Energy, Electricity Authority, and Budget Division. Simhon highlighted that the current government has approved the construction of power plants that will increase current production capacity by nearly a quarter, resisting pressure from municipalities to block these sites.

Simhon asserted that excuses regarding energy shortages are no longer valid, as electricity production from gas-powered plants is projected to increase by 20-25% by 2031. He dismissed the Electricity Authority's proposal that server farms use only renewable energy as contradictory to government decisions and accused the Budget Division of using renewable energy as a pretext to limit server farm construction. He stated that the Electricity Authority has effectively rejected a government decision and that halting new applications, many of which are deemed unserious, is a way to avoid responsibility.

Simhon concluded by emphasizing the need to adopt government decisions for filtering frivolous applications and warned that failure to remove obstacles to server farm construction will lead to significant future problems. In a separate statement, Amir Shavit, Chairman of the Electricity Authority, addressed concerns about solar tariffs, assuring that there would be no "regulatory cliffs" and that subsidies would be balanced against consumer electricity rates. He also highlighted the Authority's increased oversight for reliability and adherence to construction timelines, noting significant investments in the electricity sector and the economy's resilience during emergencies.