The present paper develops a model to optimize the daily operation of a hybrid energy system consisting of a hydrokinetic, a pumped hydro storage system and diesel generator. The optimization approach is aimed at minimizing the cost function subject to the availability of water resource, the variable load requirements, and operational constraints of the hybrid system's components. The main purpose of the developed model is to minimize the daily amount of diesel fuel consumed to supply the load while maximizing the use of the hydrokinetic operating in conjunction with the pumped hydro storage. For simulation purposes, the hourly load demand, resource data for a selected rural area in South Africa have been collected and used as an input to the developed model. The economic analysis has resulted in the calculation of optimized daily operation cost of the proposed hybrid system in summer and winter conditions. The obtained results demonstrate that a substantial reduction in the daily operation cost can be achieved (88% in summer and 97% in winter) using the hybrid system compare to the case where the diesel generator is used alone. (C) 2015 Elsevier Ltd. All rights reserved.