The funds will support a project to increase renewable energy generation and access in the islands of Malekula and Espiritu Santo in the South Pacific Ocean.

The bank will provide a concessional loan equivalent to $2.5m to help fund the project and ADB’s Special Funds resources will also provide a $2.5m grant. The Strategic Climate Fund will contribute a $7m grant and the Vanuatu government will provide a further $3.1m.

 “The project will deliver an increased supply of clean, renewable electricity to households in Malekula and Espiritu Santo,” said James Lynch, deputy director general of ADB’s Pacific Department.

“This will have a positive effect on the livelihoods of rural households and will also decrease long-term reliance on diesel fuel,” he added.

The project will construct a hydropower plant, which could provide more than 90% of the total energy generated for the Malekula grid through to 2040.

It will be extended to an additional 1,050 households on the two islands. Approximately 75% of Vanuatu’s population lives in rural areas and have limited electricity access.

Jean Pierre Nirua, Vanuatu’s acting minister of finance and economic management, said: “We sought the generous assistance of ADB to help produce and deliver low-cost hydropower energy and grid extensions in the two targeted provincial centres.

“Once renewable energy arrives in Malekula and Espiritu Santo, the lives of the people in both islands will significantly change for the better.

“The supply of low-cost energy will greatly enhance increased business activity and contribute to better economic growth in the villages.”

Where electricity is available in the area, it is mostly generated from diesel and other fossil fuels.

The agreement, signed on October 11, is supported by the ADB-supported Pacific Renewable Energy Investment Facility.