Conventional energy resources such as coal, lignite, oil, etc. are fastly depleting and will be reduced to a very minimum in the next 50 years. Energy is the key input in all sectors of any country’s economy. The per capita energy consumption is the measure of the prosperity of the nation. In India, there is a huge deficit of electric power. For the prosperity of the nation, the electric power generation is to be enhanced so as to meet out the growing power demand. Noting the finiteness of fossil energies and also the existing multiple obstacles in the development and construction of concentrated production resources and creation of transfer lines, using Microgrid (MG) is increasing rapidly in the world. The microgrid concept is a natural evolution of distributed resources that may be used to serve energy to customers in areas where conventional power system approaches cannot satisfy the reliability needs. Microgrids may also provide support to conventional power systems that are too constrained to meet the power demands of customers. In rural and remote areas of TamilNadu,India, there is a minimum of 8 hours power cut daily by which agricultural production is worstly affected. In these areas, clean and pollution free electric power generation can be made available by setting up Microgrids at the required load centres. This paper presents a case study of a remote village dependent on agriculture, with grid extension in the district of Tirunelveli, TamilNadu, India. The latitude and longitude of the study area are 8° 42’ N and 77° 42’ E respectively. The proposed model consists of Photovoltaic (PV) array, wind energy subsystem, and battery storage sub-system. Though the initial capital cost is higher, the need and better utilization of renewable energy resources, improved efficiency due to reduction in line loss and power supply reliability would offset the initial cost factor.

This paper deals with the optimal cost analysis of the proposed MG system for islanded operation using Hybrid Optimization Model for Electric Renewable (HOMER) software with the ultimate goal to minimize the Total Net Price Cost (TNPC) and the Cost of Energy (COE) with zero percentage of capacity shortage.). Simulations results are carried out with the proposed system using real life experimental data, to test the performance and accuracy of the system. Overall results obtained demonstrate the effectiveness of the proposed method, covering of total consumption power as well as to reduce COE.