The Republic of Nauru has inked a memorandum of understanding with Australian renewables company Smart Commercial Energy to explore a major solar and battery project.
Nauru Utilities Corporation chief executive Anthony Dimapilis said the oil crisis triggered by the effective closure of the Strait of Hormuz had brought energy security sharply into focus for his country.
"We are keen to have further discussions on getting us out of this fuel dependency," he told AAP after the MOU was finalised at the Smart Energy Council's annual conference in Sydney.
Nauru, like many other small Pacific island nations neighbouring Australia, is heavily dependent on diesel for power generation, leaving it exposed to the oil-price spikes that occurred in the wake of the United States-Israel attack on Iran.
An 18MW solar and 40MWh battery storage solution is proposed under the new arrangement that's expected to bring the tiny country of 13,000 people close to 100 per cent renewables-run.
The plan is to deliver it through a Power Purchase Agreement that will see the Smart Commercial Energy fund, build and operate the infrastructure, with a built-in pathway for Nauru to eventually own and operate the system.
Smart Commercial Energy founder and managing director Huon Hoogesteger said the project would halve the cost of electricity from day one and cut dependency on costly and emissions-intensive diesel.
The investment structure would also keep the returns in-country rather than lending and extracting wealth back out, as had been done in the past.
"They actually can control their own destiny," Mr Hoogesteger told AAP.
"The money that it does generate, which is a fantastic return, goes back into the country, so they can continue to build infrastructure with the profit that they're getting from it."
The aim is to get the nation to roughly 95 per cent renewables-powered through the relationship, recognising some diesel generation may be needed to support the network through prolonged stints of cloudy weather.
Nauru, Cook Islands, Marshall Islands, Samoa, Tuvalu, and Vanuatu have all pledged to achieve 100 per cent renewable energy by 2030, with many other island states also setting ambitious goals.
While energy security is a key driver behind the region's clean energy push, Pacific islands are also vulnerable to rising sea levels and other climate impacts and have long played an outsized role in international negotiations on limiting global warming.
According to Smart Commercial Energy, the MOU marks the start of technical and commercial investigations, with no timeline given for when further steps may be taken.
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