This paper analyzed the potential implementation of hybrid photovoltaic (PV)/wind turbine/diesel system in southern city of Malaysia, Johor Bahru. HOMER (hybrid optimization model for electric renewable) simulation software was used to determine the technical feasibility of the system and to perform the economical analysis of the system. There were seven different system configurations, namely stand-alone diesel system, hybrid PV–diesel system with and without battery storage element, hybrid wind–diesel system with and without battery storage element, PV–wind–diesel system with and without storage element, will be studied and analyzed. The simulations will be focused on the net present costs, cost of energy, excess electricity produced and the reduction of CO2 emission for the given hybrid configurations. At the end of this paper, PV–diesel system with battery storage element, PV–wind–diesel system with battery storage element and the stand-alone diesel system were analyzed based on high price of diesel.