Guarantees amounting to hundreds of millions of shekels and rigorous scrutiny by the Prime Minister's Office's new Israel AI National Directorate are two of the conditions currently taking shape at the Israel Electricity Authority for data center developers seeking grid connection approvals, *Globes* has learned.
Last July the Electricity Authority halted issuing grid connection licenses to data center developers. Data centers house computing and AI servers, serving as the main hubs for cloud and AI processing operations. However, the rush toward AI processing has driven many developers in Israel to join this hot real estate trend and significantly expand their construction plans in the sector. According to the Electricity Authority, the volume of connection requests reached 27 gigawatts - a staggering figure that, if approved, would have compromised the electricity supply to other sectors.
The Israel AI National Directorate recently determined that no more than 2 gigawatts are required to meet Israel's data center needs, and industry estimates suggest that a maximum of 2.5 gigawatts will be allocated for this purpose in the coming years.
Fears of contract cancellations with future clients
Following the suspension of issuing permits, data center developers are reporting uncertainty and fear that contracts with future clients could be cancelled or marketing opportunities lost. This situation persists pending a decision by the Electricity Authority on the criteria for issuing permits - a move expected to take place in November.
"Globes" has learned that the Electricity Authority and the Prime Minister's Office's new Israel AI National Directorate are currently formulating two threshold conditions for obtaining approval to connect to the national power grid.
The first is a guarantee payment of about NIS 2 million per megawatt, payable at the time of application and refundable to the developer on the granting of the building permit. Under this arrangement, a plan to build a 100-megawatt data center would require the owner to pay NIS 200 million for a period of one or two years. For exceptionally large grid connection requests, such as the application for a 1.1-gigawatt facility in Hadera filed by developer Tzahi Nahmias’s Mega DC, this would entail a massive one-time expenditure of NIS 2.2 billion.
In recent months, dozens of developers have approached the Electricity Authority seeking electricity approvals - a process that previously entailed merely submitting a plan, with no special cost or clear criteria. In effect, the allocation of electricity licenses operated on a "first-come, first-served" basis, without any requirement to assess the developer's financial capacity or experience in building data centers.
Prominent applicants: Tzahi Nahmias and Yossi Sheinfeld
The partial list of applications leaked last month from the website of Israel’s electricity grid manager Noga, includes numerous developers. These range from the Anan Group (owned by Maor Malul and Omer Adam), Mehadrin (owned by Yitzhak Tshuva’s Delek Real Estate), Nofar Energy (Ofer Yanai), and Nadav Balila Logistics, to companies such as Ampa and Doral. An analysis of the list, based on industry sources, reveals that the two most prominent developers are Tzahi Nahmias and Yossi Sheinfeld.
Mega DC, owned by Nahmias, has submitted grid connection applications totaling about 12 gigawatts - nearly half of all applications appearing on the list. Mega DC’s applications cover sites in Hadera, Mateh Yehuda Regional Council, the Ashdod area, Beit Shemesh, Tziporit, and Haifa. SDS, owned by Sheinfeld - a pioneer in Israel’s data center sector - has submitted applications for nearly 2 gigawatts in Or Yehuda, Shoham, and Modi'in, including a massive 875-megawatt data center in Nesher.
According to industry sources familiar with the operations of SDS and Mega Or, the large volume of applications was submitted based on the assumption that only a few would be approved, as well as in response to the lengthy and cumbersome process managed by Noga, which has no clear policies and criteria.
Will the new criteria curb the trend?
The Electricity Authority’s new criteria are intended to curb this trend by requiring developers to post guarantees, ensuring that the site for which approval is sought is genuinely suitable for the planned data center. Electricity Authority officials also hope that the guarantees requirement will deter developers lacking sufficient financial resources from the outset. Since building a data center involves costs running into the billions of shekels, well-capitalized developers will not be deterred by the need to post a guarantee of several hundred million shekels.
The second condition for obtaining an electricity license involves securing approval from the AI National Directorate, a move that effectively transforms it into a regulatory authority for the first time. Founded in the past year and led by Brig. Gen. (Res.) Erez Askal - a former Intelligence Corps officer - the directorate has so far focused on formulating a national AI strategy, drafting national tenders for quantum computing activities, and advancing a robotics initiative. Now, the directorate, led by senior security forces veterans and the Accountant General’s office, is becoming a key gatekeeper for data center construction projects. It is anticipated that the task force will approve plans submitted by developers that can demonstrate expertise and experience in building data centers, possess the capacity to secure the necessary financing and capital, and maintain connections with industry clients, such as neo-cloud companies and firms seeking AI services.
The Electricity Authority said, "The formulation of measures to accommodate additional data centers is currently the subject of intensive work in collaboration with relevant stakeholders. Once completed, the Authority will publish the proposed framework for public comment, in accordance with standard procedure."
The National AI Directorate said, "The Directorate is working closely and in full coordination with the Electricity Authority to identify solutions that balance the urgent need to establish advanced computing infrastructure for the benefit of the Israeli economy with the simultaneous management of limited energy resources. Intensive joint efforts are currently underway to ensure the Israeli economy has access to the most advanced capabilities, and this goal will be achieved."
Published by Globes, Israel business news - en.globes.co.il - on September 29, 2026.
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