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.