Everyone wants to build server farms here. So what is the problem?
Following a surge in connection requests totaling about 27,000 megawatts—several times Israel's peak summer consumption—the Electricity Authority has halted approvals for new server farms. Experts warn that electricity availability has become a strategic bottleneck for AI development. Proposed solutions include transitioning to liquid cooling, infrastructure optimization, and deploying hardened, secure facilities.
Last month, the Electricity Authority made a dramatic decision, halting approvals for connecting new server farms to the power grid for 140 days. This follows a massive surge in connection requests: within two months, requests totaling 19,000 megawatts were received, adding to an existing backlog of 8,000 megawatts, bringing total cumulative demand to 27,000 megawatts.
"We are used to thinking of artificial intelligence as software, but at its base lies a very heavy physical infrastructure," says Yonit Goldberg, chair of the Israel Server Farm Association and founder of 11Stream. "Every query activates processors, consumes electricity, and generates heat. As AI usage grows, the need for infrastructure grows accordingly."
The Energy Challenge
The numbers explain why the Authority hit the brakes. Peak consumption in August 2025 stood at about 15,806 megawatts. In a Knesset discussion, Uzi Zarachia, VP of Planning and Development at Noga, noted that pending requests for data centers (20,000 megawatts) exceed the peak consumption of the entire State of Israel on the hottest summer day. For comparison, the current peak demand of the Israeli electricity market is about 17 gigawatts.
The Electricity Authority explained that unlike traditional large consumers, server farms create a sudden, simultaneous rush on grid resources. The System Manager warned that further approvals without risking system stability were impossible.
Market Rush and New Entrants
Over the last two years, at least 12 public companies have announced their entry into the server farm market. Alongside veterans like Bynet, Bezeq International, and Med One, and international giants like Amazon, Google, Microsoft, and Oracle, private investors such as Omer Adam have joined the fray. In April 2026, the company Anan reached a market value of approximately 3 billion shekels following a deal to build a data center in Afula for the American AI giant Crusoe.
According to 11Stream, there are over 25 commercial server farm sites in Israel with a cumulative IT capacity of about 330 megawatts. While most activity is concentrated in the center, expansion is spreading to the Haifa area, the Negev, and the Sharon region. Goldberg emphasizes: "Electricity availability has become the industry's strategic bottleneck. Without a grid connection, there is effectively no project."
Optimization and Security Solutions
Aviv Hanesh, Director of the Data Center Division at Bezeq International, notes that proper planning—including advanced cooling systems and precise management of the PUE (Power Usage Effectiveness) index—can significantly reduce energy consumption. Furthermore, the security situation has sharpened the demand for hardened, underground backup sites to ensure business continuity (BCP) and disaster recovery (DR).
Yaki Shaltiel of HPE Israel advocates for Direct Liquid Cooling (DLC), which is 10 times more efficient than air cooling and allows for a PUE ratio close to 1. He also highlights the "AI Factory" concept—compact, containerized solutions that can be deployed within existing campuses.
Nir Hollander, CEO of Nutanix Israel, adds that Hyper Converged Infrastructure (HCI) can consolidate servers, storage, and networking into a single software-based system, reducing energy consumption by over 27% and lowering the organization's carbon footprint.
