The energy transition in islands poses a significant challenge, yet it also presents a considerable opportunity for sustainable social and economic development. A promising evolution towards this direction emerged recently in Greek islands. Although there are several research studies exploring the effect of the integration of Energy Storage Systems (ESS) in the long-term planning of Greek insular systems, little attention has been paid towards the short-term Dispatch. In this paper, a day-ahead optimal dispatch strategy is presented for the Ikaria island, a pioneer in the pathway towards decarbonization and clean energy transition of Greece. Ikaria possesses a Hybrid Power Plant (HPP) consisting of three Wind Turbines (WTs) and a hydro-pump storage (HPS). However, still the exploitation of the HPP is limited due to its current operating mode. The aim of this study is to construct an optimization framework considering operational aspects and CO2 emissions with particular emphasis on the HPS and thermal unit modelling so as to lift the barriers for the operators and help increase the Renewable Energy Sources (RES) penetration, minimize CO2 emissions in Ikaria, optimize islands interconnection management and transform Ikaria into a paradigm insular system with respect to its short-term dispatch and control operation.