Israel wants an AI data center boom. Its power grid may not be ready
The Electricity Authority is preparing new rules for connecting energy-intensive facilities as data centers could account for 20% of national electricity consumption by 2030. Industry figures say transmission bottlenecks, gas dependence and national security concerns make local computing infrastructure both a challenge and a strategic necessity.
During the August 2025 heat wave, Israel broke its electricity consumption record four days in a row. The new peak of 17,282 megawatts was 10% higher than the previous record, set just two years earlier. Israel’s current electricity generation capacity stands at approximately 18,800 megawatts.
Despite the strain on the system, the Electricity Authority is expected to publish a regulatory framework today for connecting data centers to the grid. The move would allow more energy-intensive facilities to connect to an electricity system already operating close to its limits during periods of peak demand. According to the Authority’s load forecast, data centers could account for up to 20% of Israel’s electricity consumption by 2030.
In July, the Electricity Authority halted approvals for applications to build data centers in Israel. The framework expected today is intended as a compromise, allowing construction to proceed while limiting the strain on the country’s infrastructure. Under the proposed rules, each data center would be capped at 200 megawatts of power consumption, roughly equivalent to the electricity demand of a mid-sized Israeli city such as Rehovot or Holon.
According to estimates, as many as 15 facilities could be built at the maximum capacity of 200 megawatts. The proposed cap would apply to half of the 100 connection requests submitted to Noga, Israel’s electricity system operator.
According to sources in the electricity sector, generation itself will be a challenge. “Electricity generation will be a problem. We see how hard it is to build a power plant in Israel, and how much politicians try to avoid decisions like that,” they said.
The transmission grid, however, poses an even greater constraint, according to the sources. “There are problems in the transmission grid in the center of the country, and so it’s actually in the periphery that the risk is an opportunity. In the Negev there is renewable energy; instead of transmitting the electricity north, you can route it to data centers.”
The challenge is not only how much electricity data centers consume, but also when they consume it. “Usually, there’s a kind of balance in electricity consumption: work zones and offices during the day, and residential areas in the evening. But data centers run 24/7 and raise the base load on the system, meaning several power plants need to run without stopping,” the sources said.
Heavy electricity demand would also increase consumption of natural gas from Israel’s reservoirs. According to the Energy Ministry, those reserves could be depleted in less than 20 years, and greater reliance on gas-fired generation would also increase air pollution.
Why, then, do data centers need to be built in Israel? Why not rely on facilities overseas, as Israeli companies and institutions do today?
“The world is in the midst of a technological arms race, in which countries and giant corporations are investing hundreds of billions of dollars in building the computing infrastructure that will determine the balance of power in the global economy in the coming decades,” Shelly Lanzman, a partner and chair of the advisory board at NED, a company specializing in building and developing data centers and the former CEO of Microsoft Israel, told Calcalist.
“Already today it’s clear that the scope of computing power, its strength and its availability will be decisive factors in the ability of countries to develop technologies and preserve a competitive advantage,” she said.
In this context, Lanzman argues, data centers should be treated as national infrastructure on a par with power plants, airports and communications networks. “For Israel, whose economic and security standing relies to a large extent on technological superiority, this is a national interest of the first order.”
National security is another argument for operating data centers locally. Government agencies and other organizations handling sensitive information, including the Shin Bet, the Mossad, the military and hospitals, increasingly rely on advanced AI and data systems. These organizations handle information with significant security or privacy implications, making local storage an important part of protecting it.
Operational independence and continuity of service are also concerns. About a year ago, Microsoft restricted Unit 8200’s access to some of its cloud services after determining that the unit had violated the company’s terms of use. The decision followed reports that the service had been used to collect information on and track Palestinians, including by storing recordings of millions of their phone calls.
Beyond security, a strong domestic data center industry could give Israeli entrepreneurs an advantage when launching startups and help attract international companies. Access to computing infrastructure is becoming an increasingly important consideration for businesses developing and deploying AI.
“The global race is already creating growing competition for critical resources, from electricity supply and advanced chips to computing equipment, land and investment capital,” Lanzman added.
