Israel's Electricity Authority has drawn a hard line under the country's data center boom, publishing on Sunday evening the main points of new rules that cap any single new facility at 200 megawatts of capacity. The decision, reached after months of internal deliberation, responds to a surge in connection requests that threatened to overwhelm the national grid and reshapes how one of the country's fastest-growing industries will be allowed to expand.
A Grid Under Pressure
The scale of the problem explains the urgency behind the new framework. Noga, the company that operates Israel's electricity system, had received requests to connect data centers with a combined capacity of roughly 27,000 megawatts - about three times the country's current average consumption. Faced with demand of that magnitude, the Authority issued a temporary freeze on new connection approvals while it worked out a longer-term policy. The rules announced Sunday are the result: a ceiling of 200 megawatts per facility, with an additional 1,000 megawatts set aside for large data centers overall. Combined with the roughly 2,000 megawatts already approved, total allocation will reach approximately 3,000 megawatts, a figure the Authority says would amount to around 20% of Israel's projected electricity consumption by 2030.
Guarding Against Speculation
Officials are clearly wary of a secondary problem: developers reserving grid capacity for projects that may never materialize, or trading access rights as a speculative asset. To discourage this, the rules require financial guarantees of NIS 2 million per megawatt of requested capacity, a threshold meant to filter out proposals without serious financial backing. Developers will also have to accept backup mechanisms allowing their facilities to be disconnected during periods of extreme grid stress - an acknowledgment that data centers, unlike most consumers, draw power on a scale comparable to an entire mid-sized city and can strain supply during peak demand. A single 200-megawatt facility typically costs more than NIS 4 billion to build, underscoring how much capital, and how much electricity, is now concentrated in this sector.
What Gets Built, and What Doesn't
The cap effectively blocks some of the more ambitious proposals already filed with Noga, including requests for facilities as large as 500 and even 1,100 megawatts. Those megaprojects will not proceed under the current rules, at least not as originally envisioned. Yet restricting new connections does not solve Israel's underlying energy challenge. Demand from data centers and the broader economy continues to climb, and the country will still need to expand its generation capacity regardless of how connection requests are managed. Capping access to the existing grid buys time and order, but it does not create new electricity.
Gas Prices Add a Complication
The timing is notable because it comes amid warning signs in the natural gas market, which underpins much of Israel's electricity generation. A supply deal involving NewMed and Ratio, partners in the Leviathan reservoir, recently collapsed, raising questions about future gas availability and pricing. Last June, Israel Electric Corporation's legal adviser, Gershon Berkovitz, warned publicly that gas prices could rise and flagged concerns about competition in the domestic market, cautioning that unresolved problems could eventually threaten the state's ability to meet its own energy needs. Against that backdrop, a policy that still allows for a near tripling of data center capacity by 2030 represents a calculated bet that supply constraints can be managed even as demand grows.
What Comes Next
The full regulatory decision is expected to be published within days, opening a three-week public consultation period. The Authority has signaled it will review submitted comments and may adjust the final rules before they take effect. For an industry built on long planning horizons and billion-shekel investments, that window of uncertainty matters: developers now face a ceiling they did not anticipate, a guarantee requirement meant to separate genuine projects from speculative ones, and a grid that, however expanded, remains finite.