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Power demand of isolated villages where on‐grid power supply is not economical can be met by standalone renewable energy system. Hybrid renewable energy system (HRES) considered in the current study involves photo‐voltaic, wind turbine, diesel generator, and battery. In the present study, the demand side energy management methods are used for energy management. The load shifting and strategic conservation methods are used. The energy management schemes are applied in the stage of load estimation. It is observed in the analysis that, the net present cost (NPC) of $55 263 is reduced to $34 009 with the application of demand side energy management strategies. The two control strategies, load‐following and predictive‐dispatch strategy are incorporated. The three types of batteries like lead‐acid, lithium‐ion, and zinc‐bromide are integrated, one at a time, for analysis. The analysis results in the optimal HRES configuration solution with the combination of both load shifting and strategic conservation techniques of demand side energy management. The NPC is reduced by 37% in comparison with the HRES without the application of energy management methods. The zinc‐bromide battery integrated HRES configuration through predictive dispatch control strategy with the application of demand side energy management schemes results in optimal solution for electrification of cluster of villages located in Uralagallu panchayat, Sagar Taluk, Shivamogga District, Karnataka, India. To the similar kind of geographical condition areas, the same HRES configuration with similar approach can be extended for electrification.