This paper focuses on the design optimization of a stand-alone hybrid microgrid serving a 2000 inhabitants community located in a rural area of Bihar (India) and it investigates the potential of the use of wood biomass for electricity generation. The economic performance of the different power generation configurations is evaluated simulating the microgrid operation over four periods of five days representative of a whole year with a time step of 10 min. The system operation is defined by an Energy Management System (EMS) which ensures that the demand of different goods by the community (AC and DC power, heating, domestic hot water, cooling and water for irrigation and domestic use) is satisfied with the minimum operational cost thanks to a proper optimization of the programmable units scheduling. For each time step, the most cost effective schedule is obtained using Mixed Integer Linear Programming (MILP) embedded in a rolling horizon approach considering start-up penalties, battery wear cost, ramp limits of each component and other operational constraints. Three different system configurations are investigated. The first one considers the combination of photovoltaic panels and a diesel internal combustion engine (ICE). The other two investigate the possibility to substitute the fossil fuel generator with a renewable energy dispatchable generator powered by wood biomass: (i) a down-draft gasifier coupled with an ICE and (ii) a boiler coupled with an Organic Rankine Cycle (ORC). The obtained results show that the integration of renewable energy sources technologies has a beneficial effect on the LCOE of isolated microgrids. The introduction of PV panels allows, in the optimal case, a LCOE reduction of 19% in comparison with system based only on Diesel engine. A further, twice as much, decrease (up to 38%) is attainable using biomass as main energy source: both Gasifier-based and ORC-based systems show similar economic performances and ensure a share of electricity generated by renewables of about 95%. (C) 2016 Elsevier Ltd. All rights reserved.