Israel reportedly plans to cap the capacity of new data centers at 200MW, a national rule adopted as the country faces unprecedented data center demand.

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

Calcalistech first reported the new rules, which were enforced because of a large influx of data centers seeking grid connections. The rules are intended to prevent speculative projects from congesting the grid connection process. They will require developers to provide guarantees of NIS 2 million ($643,300) per megawatt of requested connection capacity. The rules also 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 unprecedented demand for power from its data center sector. NOGA (Israel Independent System Operator), the country's national electricity operator, said it had approximately 27GW of projects seeking a grid connection. In response, it issued a temporary order in July to freeze responses to data center requests. The freeze is expected to last until early December and will affect all data centers with a capacity of 8MW or more. During the freeze, the Electricity Authority, the Ministry of Energy, and NOGA will conduct a joint review to develop a new policy for allocating electricity resources between data centers and the wider economy.

Officials attributed the surge in connection requests to the National Cyber Defense Bill passed by the Israeli government, which defined data centers as national infrastructure in order to remove planning and construction constraints. The Knesset passed the bill 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 10 to 15 years through leases.