The electrification of many remote islands in Greece is satisfied by autonomous diesel-fueled power stations. The operation of those stations brings a number of environmental and economic drawbacks. It is proven that integration of renewable-based systems along with storage technologies can contribute to limitation of those problems. The scope of this thesis is to investigate the optimal size and operation of a battery storage technology for the hybrid power system of Agios Efstratios. The optimization procedure is done with respect to the net present cost (NPC) of the system. Additionally, the feasibility of incorporating different battery technologies is evaluated and an interconnection scenario with a nearby island is assessed. Furthermore, the island’s network is analyzed under normal operation conditions, the optimal placement for the renewable and storage units is explored and finally, the dynamic behavior of the battery is analyzed under various generation/load conditions.