The air service which includes the shortest scheduled flight in the world could start to use electric-powered planes within three years.
Loganair's Orkney island hopping air service is famous for the 1.7 mile jump between Westray and Papa Westray.
The airline is working with experts in the hope of making the electric service a reality by 2021.
Loganair said the Islander aircraft it uses could be modified rather than developing a model from scratch.
It takes about two minutes - including taxiing - to complete the 1.7 mile Westray / Papa Westray leg flight, which is about the same length as the runway at Edinburgh Airport.
The record is 53 seconds.
The short inter-island services are seen as an ideal possible route for electric planes as a limitation of the aircraft would be range.
As well as Westray and Papa Westray, the inter island routes via Kirkwall on mainland Orkney also serve Sanday, Stronsay, Eday and North Ronaldsay.
Loganair is working with Bedfordshire-based Cranfield Aerospace on the project, which the airline believes could see it be the first to introduce electric planes on a passenger service.
'Very short flights'
Paul Hutton, chief executive officer of Cranfield, told the BBC Scotland news website: "We have been looking into new propulsion technology to make aircraft more environmentally friendly.
"The challenge is getting the technology into a place that's suitable for commercial service.
"Very short flights is where the idea came from. There are also a huge amount of renewables in that part of the country."
Loganair managing director Jonathan Hinkles told the Press and Journal newspaper: "It might end up being the first in the world. I'm not aware of any companies with similar plans at the moment, although there may be someone working out there that could do it before us.
"Orkney is a fantastic place to start this kind of development because the islands are well known for the leading role they have taken in renewable energy and embracing new developments in the sector."
He said the idea was being supported by Orkney Islands Council, on whose behalf Loganair operates the inter-island service.
Orkney Islands Council Leader James Stockan said: "This is a community with a strong track record when it comes to innovation and I am pleased that this pioneering project looks set to be developed in Orkney.
"Our inter-island air service provides a lifeline for our more remote communities and is subsidised by the council. We are keen to see if this project could significantly reduce the amount of expensive aviation fuel required to run the service - and, most importantly, if this can be done safely. That will always be our paramount consideration."
He explained: "As a council we are committed to becoming carbon neutral, primarily by making best use of the abundance of renewable energy our islands produce.
"We are already supporting innovative projects involving hydrogen produced locally using wind and tidal energy.
"It would be a remarkable achievement if the first electric-powered commercial aircraft operated here as well."
In 2013, a pilot who completed the world's shortest scheduled flight more than 12,000 times took to the skies over Orkney for the last time.
Stuart Linklater retired after making his final trip on the route between Westray and Papa Westray.