Stand-alone MicroGrids based on renewable energy sources have emerged as a suitable way of ensuring reliable energy supply in rural areas without access to electricity grids. Planning of such stand-alone grids should ensure systems that provide electricity with high security, reliability and an acceptable impact on the environment, all at a minimum cost. Transition away from traditional use of biomass for cooking and heating in developing countries, to more efficient, modern uses with less negative impacts on the local environment, is also an important measure on the way towards sustainable use of energy. This paper presents technical and economical investigations of the potential for using biomass for electricity generation in a micro-grid for the village of Wawashang, Nicaragua. The simulation tool HOMER is used to evaluate a reference case based on only photovoltaic (PV) power generation with battery energy storage compared to a case including a biomass steam turbine based on local biomass resources. The results show how the use of biomass in combination with PV reduces the impacts of seasonal variations and results in a more reliable and cost-effective system. © 2014 IEEE.