Local renewable energy sources have the potential to provide power security to societies. The main objective of this research is to improve electricity reliability in grid‐connected societies in case of the grid failure or during blackouts. Here, a cost‐effective method to utilize local irregular renewable energy sources for community applications has been proposed. Solar PV, pumping units, domestic loads, and pico hydro are the main parts of the proposed system. The storage water tank also performs the function of pump storage to deliver power during off‐sun periods. The pump storage generates electricity by using the unused potential of the water stored in the storage tank. In islanded mode, the system delivers power to the village to essential loads and fluctuating power to the dump load. The paper provides a case study in which the proposed DC microgrid has been demonstrated for a society to validate the system's performance for different practical scenarios. It has been validated for financial and technical feasibility through economic analysis and MATLAB Simulation performance respectively.