Following a rise in population, load demand is increasing even in the remote areas and islands of Bangladesh. Being an island that is also far from the mainland of Bangladesh, St. Martin’s is in need of electricity. As it has ample renewable energy resources, a renewable energy-based microgrid system seems to be the ultimate solution, considering the ever-increasing price of diesel fuel. This study proposes a microgrid system and tests its technical and economic feasibility in that area. All possible configurations have been simulated to try and find the optimal system for the island, which would be eco-friendly and economical with and without considering renewable energy options. The existing power supply configuration has also been compared to the best system after analyzing and investigating all technical and economic feasibility. Sensitivity and risk analysis between different cases provide added value to this study. The results show that the current diesel-based system is not viable for the island’s people, but rather a heavy burden to them due to the high cost of per unit electricity and the net present cost. In contrast, a PV /Wind/Diesel/Battery hybrid microgrid appeared to be the most feasible system. The proposed system is found to be around 1.5 times and 28% inexpensive considering the net present cost and cost of energy, respectively, with a high (56%) share of renewable energy which reduces 23% carbon dioxide.