Palau plans to install solar-powered street lamps along a new 90-kilometre road as part of a project funded by the European Union.
Palau's president, Tommy Remengesau, says a EU official is due to arrive today to finalise the grant worth 1.3 million US dollars.
Mr Remengesau says while Palau has many natural resources, it relies on fossil fuels, which harms the environment.
He says Palau is also working with a Japanese university to build an ocean-thermal-energy-conversion plant that would use seawater temperature differences to produce power.
The president says a goal of his administration is to retain Palau's natural resources as they support its tourism industry and are an integral part of its traditional culture.