Hybrid power systems based on new and renewable energy sources, especially photovoltaic and wind energy, are an effective option to solve the power-supply problem for remote and isolated areas far from the grids. Microsoft Excel software programming package is used to analyze data measurements for both wind and solar radiation measurements for the two locations in Palestine (Ramallah and Nablus). Results of analysis illustrate that energy density available in wind for Ramallah site is about 2008 kWh/m.year, while it is 927 kWh/m.year for Nablus site, and the daily average of solar radiation intensity on horizontal surface is about 5.4 kWh/m .day. A Matlab software package is used to develop a simulation program to simulate different scenarios of operation of the hybrid system by making energy balance calculations on an hourly basis for each of the 8760 hours in a year and then to choose the appropriate sizes of the different components for the most optimum scenario. The optimization is based on cost of generation. Results of the simulation illustrate that the most economic scenario is the scenario that uses a hybrid system mainly dependent on wind. Cost of xxii energy (COE) in this scenario is 1.28 NIS/kWh. Other scenarios dependent on wind-only hybrid system, PV-only hybrid system, wind stand-alone system, PV stand-alone system, or diesel only, give results of COE greater than this value. The amount of CO2 produced as a result of operation of the wind-PV hybrid system is very small compared with that produced as a result of operation of the diesel only. This is a very important environmental issue that shall be considered and not ignored. It was concluded that none of the hybrid system scenarios analyzed could presently be justified on COE basis, compared to the alternative of simply purchasing electricity from the grid where the COE is 0.70 NIS/kWh. Considering not electrified far from grid remote areas, changes in electricity prices, subsidy levels, costs for renewable energy equipment, or taking into account environmental considerations might alter the position in the future.