This research compares two generation components in grid-connected and stand-alone power supply (SPS) systems (6 kWp solar photovoltaic array, and a 6 kWp diesel generator), separately supplying a homestead’s electricity load (12 kWh day−1 average, 10 kWp), against a 2 km underground electricity distribution line extension. The technical simulation intervals (15 min) included realistic peak demand and generation component outputs, based on actual load data collected from an existing homestead and local meteorological data in the southwest of Western Australia. The separate emission and economic calculations incorporated technical simulation data, were based on emission factors for the region, used 2010 market prices for capital and operational costs, all projected over 15 years. The economic model included an 8% real discount rate, and several assumptions customised for each scenario. The results suggest small-scale distributed electricity generation systems are currently unattractive economically when compared to medium distance network extension, and increased the cost of electricity for private individuals (or governments if subsidised) with small mitigation benefits. The scenario results and discussions illuminate the specific economic barriers for small-scale photovoltaic components in both stand-alone and grid-connected systems in areas proximal to electricity distribution networks in regional Western Australia.