Renewable energy has shown to be a feasible and cost‐effective approach to electrifying rural villages while also meeting the region's long‐term development goals. Due to the intermittent and unpredictable nature of renewable energy supply and the need to satisfy variable demand across time, capacity planning for a sustainable energy system is problematic. Because the energy planning problem is non‐linear and non‐convex, an efficient technique must be used to build a cost‐effective energy system that supplies reliable electricity to the area. In the present work, a rural microgrid is suggested for the isolated community of the Indian hilly region. The integrated model combines existing energy resources in the area. The microgrid consists of the solar photovoltaic system, micro‐hydropower, wind energy biomass, and storage foreconomical and reliable electrification. The modeling of microgrids is based on the availability of renewable resources. Using the Differential Evolution optimization algorithm, the recommended hybrid energy model examined the per‐unit cost of energy and the overall operating cost. Based on the simulation for a year, it has been found that the optimal system has 35 kWof biomass, 30 kW of biogas, 40 kW of MHP, 144 kW of SPV, and 42 kW of the wind energy system to satisfy the energy demand of the area entirely. The per‐unit cost of energy is 0.12$/kWh, and the total operating cost is $ $2 120 700, respectively. Further, the sensitivity analysis is performed to know the impact of change in parameters on energy cost. The suggested microgrid provides a cost‐effective solution to the community.