Vanuatu will receive US$4 million for the second phase of its Rural Electrification Project to supply power to 45,000 people across the country for the first time.
The project's donors include the World Bank and the New Zealand government whose contributions will provide 9,000 homes and 37 public buildings with renewable energy.
It partially subsidises the cost of solar home systems for 8,400 households, while supporting the construction of five mini grid systems in larger communities for 550 homes.
Vanuatu's energy minister Ham Lini said electricity is crucial to development by boosting economic opportunities, including access to information technology as well as improving health services and education delivery in rural areas.
Currently, only 20 percent of Vanuatu's rural residents have access to electricity.
The World Bank's Pacific director Michel Kerf said the project marks $US40 million of support over a decade for Vanuatu's energy sector and is a step towards the government's goal of 100 percent renewable electricity access by 2030.