Decentralized renewable energy base hybrid system is an economic and convenient option for rural electrification where grid extension is not feasible. This study focuses on the design of a hybrid systems based on PV-biomass gasifier-diesel and grid and optimize the system configuration for different load profiles. The cost of energy is calculated for different peak load, energy demand profiles and grid availability. The cost of energy in case of off-grid hybrid system for peak load of 19 kW and energy demand of 178 kWh/day, is US$ 0.145/kWh. However, in case of a grid connected hybrid system, it is reduced to US$ 0.91/kWh for the same scenario. It is found that grid purchase of 9% and grid sales of 23% of the total energy demand or generation for the above load profile. The study concluded that the cost of energy for a grid-connected hybrid system is lower compared to an off-grid hybrid system for similar load profiles. Finally, the comparison of grid extension and the off-grid hybrid system has been performed, and economic distance limit is determined. The simulation result shows that the best option scenario for all the cases is biomass gasification system than photovoltaic system. (C) 2017 Elsevier Ltd. All rights reserved.