Energy Minister David Parker announced in Dunedin yesterday the Government would be helping to fund the $1.94 million project, which was expected to pay for itself within five years.
The hospital's plans were an example of how it made more sense to save energy than to generate more if it was cost-effective to do so, he said.
Lighting, heating and hot water delivery will be made more energy-efficient.
Thousands of fluorescent tubes in the hospital will be replaced with more efficient versions, which is expected to save as much electricity as would be used by 130 households.
It is expected to take several months to install the new tubes when work starts in November. The old tubes will be recycled.
Building and property services manager Warren Taylor said the amount of light from the new tubes would not be lower than from the existing tubes, although there might be a slight colour difference.
Board regional chief financial officer Robert Mackway-Jones said restrictors would also be installed to reduce the amount of hot water pouring from taps and showers, without compromising staff and patients' needs.
The hospital's 27-year-old heating and air conditioning control system will be replaced with a centralised electronic system.
Mr Taylor said the new system would automatically sense the temperature and adjust it if necessary, unlike the existing system which relied on a series of thermostats that needed individual alteration.
The change would not only reduce the amount of energy used but would improve the environment for both staff and patients.
The changes will mean the hospital uses less coal, reducing its carbon dioxide emissions by about 2300 tonnes a year, equal to taking about 700 cars off the road.
Chief executive Brian Rousseau said the board would not have been able to embark on the project without financial assistance.
Funding is coming from a loan from the Energy Efficiency and Conservation Authority's Crown loans programme ($1.595 million) with the remaining $345,000 coming from the Electricity Commission.
This project is the second energy efficiency project the hospital has had and Mr Taylor said similar changes would eventually be introduced at Wakari Hospital.
