Rakiura Stewart Island is set to reduce its reliance on diesel electricity generation after receiving a $15.35m government loan for a new 2-megawatt solar farm.

The suspensory loan, from the Government’s Regional Infrastructure Fund, was announced at a public meeting on the island this afternoon (23 Jun) by Associate Minister of Regional Development Mark Patterson.

The first stage of the new solar farm, including a 4-megawatt battery and island network upgrade is expected to begin this year.

Invercargill MP Penny Simmonds. Photo: Supplied

Invercargill MP Penny Simmonds said she was delighted that the community would benefit both financially and environmentally.

“The island’s high-cost diesel energy generation has had its day – with this new environmentally sustainable supply fantastic for local people and for the many tourists who visit the island."

"It will reduce diesel consumption by 200,000 litres within two years of beginning and massively cut energy costs for local people."

“This really is a game changer for Stewart Island, and its 494 permanent electricity connections, taking energy generation into the future, and enabling a more reliable and most importantly, affordable electricity supply - that is renewable and fits with the conservation values of the Stewart Island community."

Simmonds said the project would require 40 skilled workers during construction and once completed would support local economic growth through tourism, hospitality and aquaculture.

“Stewart Island has great potential for growth and this project secures that future progress."

Southland District Council Mayor, Rob Scott, said Stewart Island was a big jewel in New Zealand's crown and electricity prices at 85 cents have got to the point where it is impacting the small resilient community that lives there.

"This announcement is huge and will have a significantly positive impact, not just on the island but for New Zealand," Scott said.

“I’m rapt that the government has recognised this and chosen to invest in Rakiura."

"The community is long overdue for a solution, and I am looking forward to seeing it all unfold.”