Israel Tightens Rules for Data Center Construction Amid Energy Concerns

Israel's Electricity Authority is set to implement new regulations for data center developers seeking grid connection permits, including substantial financial guarantees and oversight from a newly formed AI task force within the Prime Minister's Office. These measures follow a halt in license distribution last July due to an overwhelming number of applications, which threatened to strain the national power supply.

Developers will now be required to pay a guarantee of approximately NIS 2 million per megawatt requested, refundable upon receiving a building permit. For a 100-megawatt facility, this amounts to a NIS 200 million guarantee. A massive 1.1-gigawatt application by Zachi Nachmias's Mega DC in Hadera would necessitate a NIS 2.2 billion guarantee.

The AI task force, led by former military intelligence official Erez Eskel, will now play a crucial regulatory role, approving projects based on developers' proven expertise, financial capacity, and client connections. This marks a significant shift, granting the task force, previously focused on national AI strategy, regulatory authority.

Industry insiders estimate that only about 2 to 2.5 gigawatts will be allocated for data centers in the coming years, a fraction of the 27 gigawatts requested. Prominent applicants include Zachi Nachmias's Mega DC, which applied for roughly 12 gigawatts, and Yossi Shinfeld's SDS, a pioneer in the field, which applied for nearly 2 gigawatts.

The Electricity Authority stated that the new measures are being developed in collaboration with relevant bodies and will be published for public comment. The AI task force emphasized its close coordination with the Electricity Authority to balance the need for advanced computing infrastructure with the management of limited energy resources.