No foreign nation has the right to build anything on another nation's sovereign land. Period. (Though the reality in this case is that the Women's Council in this village solicited the funds.)
That said, this is one area where I think Israel is morally failing -- the treatment of the Palestinian villages in Area C.
Its a tricky situation where the people are under the sovereignty (well semi-sovereignty) of one government ("Palestine") and the land is under the (temporary) sovereignty of another (Israel).
There are 242 of these villages. They are typically quite small. This one, for example, is home to only 162 people. In some, it would be easy enough to hook them up to a nearby grid, in others not so much. It is very much an issue of urban development vs. the maintenance of agricultural sustenance farming, made much more complicated by the political and physical conflict. It is very much a cultural issue with respect to maintaining traditional means of livelihood, made much more complicated by the political and physical conflict.
However, Israel is morally wrong, in my opinion, to both withhold services and to prevent services from being built by the other government (or with the permission of the other government). Israel should, it seems to me, decide which of these villages she will assert sovereignty over and then do it by providing all of the services she would normally provide to other Israeli towns and villages. Alternatively, those villages which Israel decides should not be under her sovereignty should be effectively ignored under the category of "not my circus, not my monkeys". If the PA wants to permit Palestinians to petition for foreign funds and build, its not Israel's problem.
The problem with this whole scenario is that it forces Israel to unilaterally change the "status quo". I don't have a problem with that. But some will.