Yakushima Island was used as a model area where material recycling and indigenous energy systems would be realized based on the zero-emission concept in the near future. We evaluated the renewable energy resources to propose a regional energy system on this island. In this paper, the present energy demand and supply structure was quantitatively specified, and the water potential was evaluated. The energy system in Yakushima is unique, with hydroelectric power supplying about 30% of the total energy consumption mainly by commercial and residential sectors. However, petroleum remains the main source of primary energy for transportation, heating, and cooking. The hydroelectric power yielded on the island is sufficient to cover all the energy demands on the island. We found that fossil fuel energy in Yakushima could be substituted with hydroelectric energy without causing an impact on the environment.