Smart hybrid microgrid for island electrification: integrated techno-economic optimization, dynamic stability, and demand response

• Designs an optimized PV–WT–BESS–grid hybrid microgrid for Hatiya Island using HOMER Pro. • Achieves a very low cost of energy of 0.0214 $/kWh with a net present cost of 30,808 $. • Reduces annual CO 2 emissions to 16,583 kg, corresponding to a 56.3% reduction compared to fossil-fuel dependence • Validates stable voltage and frequency performance through MATLAB-based dynamic analysis. • Demonstrates annual energy savings of 3,338.36 kWh using a demand response strategy. • Identifies key meteorological, economic, and reliability parameters influencing system performance through sensitivity analysis. Remote island regions in Bangladesh continue to experience unreliable and costly electricity supply due to geographical isolation, weak grid infrastructure, and dependence on fossil fuels. This study addresses this challenge by developing a smart hybrid microgrid for Hatiya Island that integrates solar photovoltaic (PV), wind turbines (PV), battery energy storage system (BESS), and grid support to achieve cost-effective, stable, and low-carbon electrification. The proposed system is optimized using HOMER Pro (v3.14.2) through offline techno-economic optimization to determine the least-cost component sizing and system configuration based on Net Present Cost (NPC) and Cost of Energy (COE). The optimal configuration obtained from HOMER Pro is subsequently evaluated using MATLAB-based simulations to assess dynamic voltage and frequency stability under renewable intermittency and load variations. In addition, a demand response strategy is analysed to enhance load flexibility, and a multi-parameter sensitivity analysis is performed to examine the influence of key meteorological, economic, and grid reliability parameters on system performance. The optimal configuration achieves a low cost of energy (COE) of 0.0214 $/kWh and a net present cost (NPC) of 30,808 $, with a capital investment of 29,303 $ and annual operating cost of 112.24 $. The system attains a 56.3% reduction in CO 2 emissions, lowering annual emissions to 16,583 kg, while demand response implementation results in annual energy savings of 3,338.36 kWh. Dynamic simulations confirm stable voltage and frequency performance under varying operating conditions. These results demonstrate that the proposed hybrid microgrid offers a reliable, economically viable, and environmentally sustainable electrification solution for remote island communities, providing a scalable framework for renewable-based power systems in coastal regions of Bangladesh.