As Islands Grapple with Spiking Fuel Costs, Renewables Offer a More Secure and Affordable Option

What is light fuel oil, and why does it matter?

Light fuel oil is a refined petroleum product similar to diesel, and is burned in generators to produce electricity. Island energy systems import this fuel by tanker, burn it locally, and pass the cost directly to governments and consumers. When global oil markets experience shocks like today’s crisis in the Middle East and the Strait of Hormuz, island energy security and costs are directly impacted.

The numbers:

• EIA Global Energy Outlooks 2025 and 2026 have stark differences, In just one year, the 2050 cost projections of light fuel oil-based power rose from $0.29 to $0.45/kWh — a ~33% increase driven by geopolitical disruption in global oil and gas flows.
• For a single 50 MW island power system, that translates to roughly $34 million more in annual fuel costs
• Meanwhile, solar + battery storage projections declined by ~46% to $0.07/kWh in 2050, wind + storage by ~40% to $0.06/kWh, and geothermal is currently at $0.09/kWh.
• The gap between fossil and clean has never been wider or more consequential.

A shared system challenge — and opportunity

The ongoing conflict in the Middle East has constrained a significant share of global oil and gas flows, sending ripple effects through fuel, electricity, and commodity markets worldwide. Clean electricity has transformed from an emerging option into a proven, scalable, and now dramatically cheaper pathway than the imported fuels it replaces.

The energy vulnerability that imported fuels create is not unique to one island. It is a shared system challenge, and the solution is the same everywhere: domestic, diversified, technology-driven clean power that doesn’t arrive by tanker.

Cost-effective solutions including peak demand reduction, virtual power plants, and new approaches to energy storage offer proven ways to grow with less risk and less capital. Those advantages compound over time, delivering both energy security and reduced fiscal pressure.

Why now?

• Fresh data from EIA’s Annual Energy Outlook 2026 vs. 2025 provides a rare apples-to-apples cost projection comparison that makes the fuel shock visible in real numbers.
• RMI has been tracking levelized cost of energy trajectories across more than a dozen island systems in the Pacific, Caribbean, and Indian Ocean.
• Continued reliance on fossil fuels risks deepening fiscal stress, price volatility, and policy trade-offs, while accelerating the clean energy transition provides a more credible path to resilience, affordability, and reduced systemic risk.

A Caribbean transition

 The Caribbean’s energy transition represents a transformational opportunity to break free from dependence on volatile fossil fuel markets and reshape the region’s development trajectory through renewable energy and energy efficiency — reducing costs, strengthening energy security, and building resilience against climate change. To guide this shift, RMI’s A Caribbean Regional Transition Scenario offers seven major categories of transition milestones that span policy frameworks, financial mechanisms, equity considerations, and public participation. Each section is broken down into supporting activities and key stakeholders to serve as a practical implementation roadmap.