Agreement at summit hosted by Sir Richard Branson will see islands switch from expensive diesel to renewables

Caribbean islands that pay some of the highest electricity prices in the world are in line for more than $1bn of green energy loans to reduce bills following an agreement between governments, companies, energy experts and financiers.

Projects that can be shown to increase energy efficiency or generate renewable energy are now expected to be rapidly approved by the US government's Overseas Private Investment Corporation (Opic), US energy giant NRG, the German government, and others.

In addition, eight islands, including St Lucia, St Kitts, Dominica, Turks and Caicos and Aruba have pledged to retrofit hospitals and schools and construct solar projects.

Caribbean islands typically generate all their electricity with diesel, which has tripled in price in the past 10 years. Some must pay more than 42 US cents per kilowatt hour (KwH) for electricity that can be three times the amount paid in Europe or the US. Countries frequently pay 15% of their total GDP or more for electricity, restricting development and impoverishing people.

At the same time, the price of solar and other clean energy sources like wind and tidal power has fallen significantly, making it more attractive for governments to switch energy sources and reduce bills.

A combination of solar and wind energy in many Caribbean countries could reduce electricity costs to just 12c/KwH.

The commitments to put up cash and devise projects are expected to help countries to work together to strike better deals with technology companies.

"We will be prepared to approve up to $250m for projects. These could cover multiple schools or hospitals, or could be used to develop wind and solar farms. Depending on the projects over $1bn might be raised," said Lynn Tabernacki, Opic's managing director of renewable energy programmes.

"This could be a game changer in the Caribbean, improving energy efficiency and reducing emissions. It makes sense to make these islands sustainable," she said.

British entrepreneur Richard Branson, who has a home in the British Virgin Islands, helped to broker the agreements through business NGO the Carbon War Room, which he set up in 2009.

"Renewables make it possible for islands to gain long-term energy independence. The technology is ready today. The transition to renewables means a clean, prosperous, and secure energy independent future for islands," he said.

"Many old hospitals in the Caribbean are just throwing away money. They are some of the most energy-intensive users. They will be able to reduce their electricity use by 20-30%," said Clay Nesler, vice-president for global energy and sustainability for Johnson Controls Inc, which has pledged to work in hospitals.