The Israeli Electrical Authority has capped the capacity of all new data centers in the country at 200MW.

First reported by Calcalistech, the new rules were enforced due to a huge influx of data centers seeking a grid connection. The new rules intend to prevent speculative projects from congesting the grid connection process, and will require developers to provide guarantees of NIS 2 million ($643,300) per megawatt of requested connection capacity. In addition, the rules call for backup mechanisms that allow data centers to be disconnected from the grid during periods of high demand.

According to reports, a full decision is slated for publication in the coming days, following a three-week public consultation.

In addition to the new capacity cap, the Electrical Authority said it will allocate an additional 1GW of power to large data centers, bringing the sector's total contracted capacity to more than 3GW. If realized, this would account for around 20 percent of the country’s electricity consumption in 2030.

Israel is facing an unprecedented demand for power from its data center sector. NOGA (Israel Independent System Operator), the country’s national electricity operator, said that it had approximately 27GW of projects seeking a grid connection, leading it to issue a temporary order in July to freeze responses to data center requests.

The freeze is expected to last until early December and will impact all data centers with a capacity of 8MW or more. During the freeze, the Electricity Authority, the Ministry of Energy, and NOGA will complete a joint review to develop a new policy for allocating electricity resources between data centers and the economy at large.

Officials placed the blame for the huge influx of connection requests on the Israeli government's National Cyber Defense Bill, which defined data centers as national infrastructure in order to remove planning and construction constraints. The bill was passed by the Knesset in February.

Israel’s data center market is projected to grow rapidly, with $963.99bn expected to be invested in the sector by 2031, according to an estimate by Mordor Intelligence. Most recently, AI data center developer Crusoe announced that it would invest around $10bn in data centers in Israel over the next ten to 15 years through leases.