Coconut oil is being developed as a fuel for power generation in Vanuatu.

Our Pacific correspondent, Sean Dorney, says the power company, Unelco, started experimenting by mixing coconut oil with diesel fuel in June.

It has been so successful that the general manager, Jean Chaniel, says it has moved beyond a test to industrialising the use of the coconut oil.

"Currently we're using a five per cent mix of coconut oil and diesel in our larger generators - four megawatts - which represents about 8,000 litres per week at present," he said.

"Not a great deal, but potentially quite a bit."

Mr Chaniel says the new fuel counters the increasing price of fuel and revitalises Vanuatu's copra industry.

"Five per cent is the initial mix that we're using and we'll increase as far as we can... the quantities could become quite significant within a year or so," he said.