The European Union, Vanuatu's government, and the local power company Unelco have agreed to co-finance increased solar energy on the island of Efate.
The total cost of the project is more than 4.6 million US dollars, with the EU providing more than 2.7 million of that as a grant.
The Honiara-based EU ambassador to Vanuatu, Leonidad Tezapsidis, says the solar power will cut energy costs and reduce the country's need to import fossil fuels.
"This is very advantageous to the countries themselves because it reduces the costs -- which are much more unpredictable -- of fossil fuels. It is a big improvement also for the environment because you have much fewer emissions of Co2."