Stupid to restrict island’s power supply (8)
I believe the answer is:
dispense
'supply' is the definition.
(thesaurus)
'stupid to restrict island's power' is the wordplay.
'stupid' becomes 'dense' (similar in meaning).
'to restrict' indicates putting letters inside (inserted letters are restricted or trapped).
'island's' becomes 'i's' (geographical abbreviation).
'power' becomes 'p' (symbol in physics).
'is'+'p'='isp'
'dense' enclosing 'isp' is 'DISPENSE'.
(Other definitions for dispense that I've seen before include "Supply (as chemist)" , "let off?" , "Deal out or distribute" , "Prepare and distribute medicine" , "Dish out, medicine say" .)