Abstract Electrification of villages from the main grid leads to large investments and losses, and this forms the basis of decentralized electricity generation. The objective of the present paper is to evolve different strategies in which the electrical energy demand of various villages of Madhya Pradesh (India) is met at minimum cost by utilizing renewable energy resources, thereby making them self-sustainable in their electrical energy needs. The renewable energy technologies considered are biomass based power generation, biogas based power generation and solar photovoltaics. The villages are categorized into five categories on the basis of the resource technology combination capable of meeting their demand at the lowest cost. The demand of villages of category (1) is met by biogas based technology only. The per unit electricity cost (PUEC) of these villages lies between Rs. 4.1 and Rs. 5.7/kW h. For villages of category (2), where demand is met by a combination of biogas and biomass technologies, the PUEC lies in the range Rs. 4.1 to Rs. 5.8/kW h. The PUEC of villages of category (3), where demand is met by biomass based technology only, lies in the range Rs. 4.7 to Rs. 8.2/kW h. The PUEC of villages where demand is met by a combination of biogas, biomass based power generation and PV technology, varies between Rs. 4.7 and Rs. 18.0/kW h (category 4). Category (5) includes those villages that do not have an appreciable amount of biomass or dung, and hence their demand is solely met by PV systems. The PUEC of these villages varies between Rs. 16.1 and Rs. 21.3/kW h. It is found that villages that have good biogas potential correspond to the lowest PUEC. This is sufficient indication for having energy policies in countries, like India, based on bioenergy (biogas and biomass).