Wind and solar energy based hybrid systems have been widely used for power generation, especially applied for electrification in the remote and islanding areas because they are cost effective and reliable performance, compared to the conventional power system. Energy storage is considerably applied to increase the reliability of hybrid renewable energy system (HRES), in which wind and solar energy is heavily influenced by the weather conditions. This paper aims to develop an environmental-friendly and cost-effective power system for residential community of Basco island in the Philippines which can replace the current system powered by the diesel generator only. Following the site data collection, the investigation of hybrid solar PV, wind, diesel generator, and battery systems was carried out to determine the optimal sizing of the system components based on some technical and economic criteria, such as system reliability, net present cost (NPC) and cost of energy (COE). Different scenarios sensitivity analysis of HRESs were simulated by HOMER software. Small capacity wind turbine was also considered for some benefits of power generation at low wind speed, investment cost and system construction and maintenance. In addition, a hybrid AC/DC link and control strategy for power balance between load and electricity production was applied to increase the system efficiency and reliability. From the optimization results, it could be concluded that the combination of system components, including solar photovoltaic, wind turbine, battery storage and diesel generator is considerably suitable for the applied area and further application for rural and islanding electrification. The proposed energy system consists of 4611 kW for PV system, 116 units for 10 kWh wind generators, 1000 kW for diesel generator, 12823 kWh for battery storage system and 1500 kW for the converter with the COE equals to 0.409 US/kWh for the 1 US/liter diesel fuel cost and the 5.1-year payback period.