Islanded power systems face unique challenges in the future in environmental, economic and social sustainability. Their high reliance on oil-fired generation leads to a carbon intensive power generation profile and consequently high costs to final energy consumers, hindering the economic development of islands. A detailed benchmarking exercise of islanded systems has been undertaken in collaboration with a group of islanded power systems under the auspices of EURELECTRIC, the association for European Power Companies. Results from this benchmarking survey of 28 different islands are presented, identifying the challenges of the current status quo, particularly in regard to generation profile and emissions. Four islands are taken for detailed study, in order to identify solutions to some of the energy challenges faced by island systems, with a focus on interconnection, renewables development and energy storage. The potential for implementing the latter technologies is positive and provides a partial solution to the challenges of islanded systems but the current costs of some innovative energy technologies, e.g. energy storage, still implies that it is not necessarily possible at present to invest in these technologies without non-market subsidies. However, islands are found to be excellent locations for pilot projects on new energy technologies due to their inherent advantages of small size and vertical integration of local power companies. Furthermore, strong communities imply that it is easier to engage with end consumers when promoting new concepts for electricity supply.