(Bloomberg News) While Greek Prime Minister George Papandreou focuses on fixing his country's economic crisis, his vision of the future centers on a small, remote Aegean island once used as a place of exile for political prisoners.

A year after winning power and inheriting a country mired in the red, Papandreou is turning back to an election pledge to go green. The idea is to use Greece's sun and wind to help propel an economy that required a 110 billion-euro ($153 billion) bailout from the European Union and International Monetary Fund this year.

"Green and clean energy is a different growth model," Papandreou said during an Oct. 5 speech in Brussels. "I believe that if we invest there, we will boost our economies."

The premier has promised to make Greece the "Denmark of the south." He expects the industry to underpin an economic revival that creates at least 200,000 jobs across the country and generates 44 billion euros of investment by 2015. The initial plan calls for turning Ai Stratis, eight hours by sea from Athens with a population of 250, into the first Greek island to run solely on renewable energy.

"New technologies associated with green development constitute a unique chance," said Nikitas Nikitakos, a professor at the University of the Aegean who was commissioned to assess Ai Stratis. "Whatever can be built in Greece with a local added-value, contributes to overcoming the crisis."

Energy Bureaucracy

The government pushed through a law this year to reduce the approval time for renewable-energy investments to eight months from three years. It also shortened the time it takes to get authorization from the Greek energy regulator to two months from as long as a year.

The legislation would help Greece achieve an EU target to derive 18 percent of energy consumption from renewable sources by 2020. The share was 8 percent in 2008, according to Eurostat, the Luxembourg-based EU statistics office. In Denmark, the goal is 30 percent, up from 19 percent.

Wind energy in Greece will account for about 83 percent of installed capacity to meet the 2020 targets, data compiled by research firm ICAP Group's Athens office show.

"Our choice to move from an economy based on consumption and borrowing to a productive model based on green development is of strategic importance for our country and our children," the 58-year-old Papandreou said last month in a speech in Thessaloniki, Greece's second-largest city. "It is the main weapon of course against climate change. It is also a lever for change in our society."

Skeptical Greenpeace

Organizations such as Greenpeace are skeptical. The economic crisis has been an excuse to slow down the use of environmentally friendly energy, said Greenpeace's Greek coordinator, Dimitris Ibraim, in a statement.

The installation of renewable energy "has been slower than expected" in Greece because of bureaucracy and an expensive licensing process, according to the European Renewable Energy Council, the Brussels-based industry trade group.

From an economic standpoint, Greece will struggle to boost its gross domestic product from renewable energy, said Konstantinos Meghir, an economics professor at University College London and Yale University in New Haven, Connecticut.

"Green growth is great, but it has to be driven by overall growth," Meghir said. "You need to build a future vision for growth and that requires a lot of work."

Greece's government repeated its forecast on Oct. 4 that GDP will fall 4 percent this year and 2.6 percent in 2011.

Distressed Area

In May, the EU and the IMF offered a 750 billion-euro rescue fund for Greece and other so-called euro peripheral nations to reduce the chances of a sovereign default. The loan package imposed budget restraints on distressed euro-area members. Governments in Greece, Spain, Italy and Portugal have all pledged to step up deficit-cutting efforts.

The Ai Stratis project was originally announced by the previous government in early 2009. Its implementation was derailed by election campaigns ahead of last October's vote, which Papandreou won.

On the island, transport will be powered by electricity and hydrogen. Geothermal pumps will be used for heating and refrigeration in public buildings and farming will be organic, according to the government's plan.

Wind-park installations will provide 500 kilowatts of power and solar energy for another 100 kilowatts, enough to meet at least half of the island's total estimated energy needs over the next five years. The plan has an initial 8 million-euro budget.

'Pilot Program'

"This is a pilot program for change," said Haralambos Makris, who represents the Ai Stratis community. "Because of its small size, this island is ideal as you can implement quickly and control the developments."

Islands of this kind will help boost exports, which will be organic, and attract tourists, Makris said. Tourism accounts for 16 percent of Greece's GDP and about one in five jobs, according to the World Travel and Tourism Council.

Greek islands depend on tourism and 13 expressed interest in being the first "green island" in Greece when the plan was initially announced two years ago, Makris said.

Ai Stratis, one of the islands used as exile points during the military dictatorship of the 1970s, was picked because of its small size of 42 square kilometers (16 square miles).

Public Power Corp SA, Greece's biggest electricity producer, has two units on the island. They will remain in operation in case the renewable sources fail.