The decarbonization of the electricity supply in isolated and remote energy systems is an open challenge in the transition to a sustainable energy system. In this paper, the possibility to increase the penetration of renewable energy sources for electricity generation on the island of Terceira (Azores) is investigated through the installation of a utility-scale energy storage facility. The electric power dispatch on the island is simulated through a unit commitment model of the fossil and renewable power plants that has the objective of minimizing the cost of electricity generation. Battery energy storage is employed to partially decouple production and supply, and to provide spinning reserve in case of sudden generator outage. Two technological options, namely lithium-ion and vanadium flow batteries, are compared in terms of net present value and return on investment, with the aim of supporting the decision-making process of the local utility. The economic evaluation takes also into account the degradation of the battery performance along the years. The results, obtained in a future-price scenario, show that both the technologies entail a positive investment performance. However, vanadium flow batteries have the best results, given that they can produce a net present value that exceeds 430% of the initial capital invested after 20 years, with a return on investment higher than 35%. In this scenario, the renewable share can reach up to 46%, compared to the current 26%.