The real cost of diesel in the Pacific
Imported fuel still generates most of the Pacific’s electricity. The 2026 oil shock has turned the case for renewables from a climate argument into a fiscal one.
- Fuel generates around 84% of electricity across ten Pacific Island countries — little changed since 2010.
- Fiji spent around $711 million on imported fuel in 2024, close to 12% of GDP.
- Replacing diesel generation could save the region around US$700 million a year, paying back the investment in a little over a decade.
For Pacific Island nations, energy security and fiscal security are the same problem. Most electricity is still generated by burning imported diesel and heavy fuel oil, shipped thousands of kilometres and exposed to every swing in global oil markets.
The 2026 shock
When conflict closed the Strait of Hormuz early in 2026, the effects reached the Pacific within weeks. Diesel prices in the region rose by around 35 per cent. Analysis by UNSW researchers suggests elevated prices could add around US$375 million to Fiji’s annual fuel bill — more than its entire health budget — and drain around five per cent of Vanuatu’s GDP.
Even before the shock, Fiji spent around $711 million on imported fuel in 2024, equivalent to 11.9 per cent of GDP. Across ten Pacific Island countries, fuel generates 84 per cent of electricity, a share that has barely moved in more than a decade.
The economic case is now overwhelming
The UNSW report Counting the Cost of Fossil Fuels in the Pacific estimates the region needs around 2.2 GW of new renewable generation and 8,800 MWh of battery storage to replace diesel power. At roughly US$650 million a year in investment, it would deliver savings of about US$700 million a year — covering its cost in little more than ten years.
Policy ambition is in place. Fiji has committed to 100 per cent renewable electricity by 2035, Pacific leaders have backed a regional 100 per cent renewables goal, and Australia has announced $13 million in new support, including $7.29 million for grid modelling engineers and a training program for regional energy professionals.
Solar alone is not the whole answer
Solar and batteries are now cheaper than diesel in several Pacific countries and are the fastest way to cut fuel use, especially on outer islands. But main island grids also need firm, around-the-clock supply. That is where baseload renewable technologies such as Ocean Thermal Energy Conversion (OTEC) — which generates continuously from the temperature difference between warm surface and cold deep ocean water — can complement solar and storage.
What delivery partners should prioritise
- Grid modelling first. High-renewable island grids need careful studies of stability, storage sizing and protection.
- Local capability. In-country installation and maintenance keeps systems running and builds the workforce.
- Climate-resilient design. Equipment must withstand cyclones, salt air and long supply chains.
- Bankable structures. Combining public finance with private delivery accelerates projects.
The NETS view
The Pacific can be the first region powered entirely by renewables. Getting there requires a mix of solar, storage and firm baseload generation, delivered by partners with both grid engineering expertise and a permanent presence in the region.
Working on a Pacific energy program?
NETS supports governments and development partners from our Suva office — from grid studies to local delivery.
Talk to NETSNew Energy Technology Solutions · info@netsolutions.energy · +679 333 0007