He added that there would be a higher subsidy for projects located in Shetland, Orkney and the Western Isles than on the Scottish mainland.
The draft deal would establish a "strike price" of £115 per mega watt hour (MWh) for onshore wind.
The so-called strike price is higher than the £100 proposed for the UK mainland in 2014-15 and is the first time the UK government has announced a different strike price for a particular area of the UK. It explained that the difference reflected the unique circumstances and potential of the Scottish islands.
Mr Davey said the proposals could see hundreds more turbines generating an additional 400MWh for the grid.
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He added: "People have been waiting for this decision to be taken, no one has taken it before, and we are delivering it.
"We think it's going to be extremely good news.
"It's going to enable them to develop these windfarms, to sell that electricity, that green energy, and they will create jobs and economic activity."
Reacting to the news, Niall Stuart, Chief Executive of Scottish Renewables, said: "This is an important step forward by the UK government after years of campaigning by the renewable energy industry and the islands' councils.
"While the move does not reduce the cost of connecting to the grid for projects in the Scottish islands, which we understand to be six or seven times higher than charges on the mainland, it does at least help new onshore wind developers mitigate against these high costs.
"We will now be working with our members to ensure that the proposed support is enough to make projects on the islands economic and for investments to go ahead.
"However, the announcement gives no certainty to the marine energy industry, whose home is very much in the Scottish islands. We will be pushing the Department of Energy and Climate Change to give this exciting sector the level of certainty it needs if we are to get projects built on Scotland's islands - home to the best wave and tidal resources in Europe."
It is understood the 'strike price' will only apply to onshore wind developments and will not impact on the marine energy industry.
(JP/CD)
