Bhutan sells electricity across the border to India. However large sections of its population do not have access to electricity. The harsh mountainous terrain coupled with sparse and dispersed settlements in Bhutan makes grid extension difficult, costly and economically unviable. Therefore, it is worth looking at renewable energy options to meet electricity demand in remote locations. This study aims to identify the least-cost technologies that could be used in the rural areas of Bhutan. The study analyses the energy needs of rural households, the resources available, and current policies and programs on rural electrification. The Hybrid Optimization Model HOMER for designing distributed generation (DG) systems both on and off-grid was used to find the least-cost technologies for different potential resources and to compare the cost of deploying these technologies with conventional electrification through grid extension. This paper identifies possible rural electrification options for Bhutan and compares them with extending the grid to the remote areas.