The decarbonization of small islands not connected to the national power grid has recently gained significant attention to improve local sustainability and test advanced clean energy solutions. Planning effective investments in renewable energy sources is crucial to ensure high levels of economic and environmental sustainability and to guarantee energy security during this decarbonization process. However, identifying solid investments is extremely challenging due to future uncertainties associated with climate change and rapid technological innovation.

Despite their significant implications for investment effectiveness, these two aspects are typically not jointly considered to support decision-makers in the energy transition process.

In this document, we propose a methodological framework to quantitatively assess the influence of climate uncertainty and technological innovation on renewable energy investments in small off-grid islands. At the heart of the framework is an energy system model that calculates system performance in terms of net present cost. By repeatedly simulating the model across various system designs—including photovoltaic, wind turbines, and wave energy converters—and future scenarios, the framework enables the identification of:

i) key climate factors affecting system performance,
ii) the most influential technological parameters,
iii) the most robust investments under different technological innovation assumptions and varying levels of risk aversion among decision-makers.

The framework is demonstrated in a case study of the island of Ustica, Italy.

The results show that photovoltaic is currently the most robust investment regardless of the technological innovation that may occur in the near future and the level of risk aversion to future changes in the availability of natural resources. Due to the significant influence of wind speed and wave power on system performance, the competitiveness of wind and wave technologies is closely affected by climate and technological uncertainty. While wind technology is currently more competitive than wave energy, except for high-risk adverse decision-makers, the results indicate that the projected improvements in wave technology by 2030 and 2050 could make it an effective investment in the short to medium term. This suggests the importance of carefully timing investments: reducing current investments in wind energy to install more wave capacity in the near future could lead to more effective investments over the entire planning horizon.