Remote communities are frequently supplied by diesel power plants with multiple generator sets. The load profile of these communities is characterized by a large peak to 
average load ratio. This variation of the load makes the choice of the amount of power that each generator should provide, for optimal operation, more difficult. A generator set should not operate below 30% of its rated capacity, and a new generator set is added to the system when the diesel power plant operates at around 85% of the rated capacity. 
Besides, a generator set should not be constantly cycling on and off, since it increases the maintenance cost and fuel consumption. The usage of renewable energy sources such as 
wind and photovoltaic (PV) presents great potential for reducing the cost and fuel consumption of remote power systems. However, it further complicates the sizing and the 
control of the diesel power plant due to its intermittent, fluctuating and stochastic nature.The objective of this thesis is to investigate the potential of Demand Side Management (DSM) based on Electric Water Heater (EWH) controlled by frequency to mitigate the difficulties created by the renewable energy sources and enhance the economical 
operation of diesel hybrid power systems. In this research, the characteristics of the diesel generator set, PV, and the electric water heater are studied. In addition, multi gensets working in parallel with economic dispatch based on secant method are presented. The mini-grid benchmark, the fuel cost for each III generator  set, EWH model and economic dispatch algorithm are all  simulated using 
Matlab/Simulink. The performance of the proposed system under various levels of PV power 0%, 25% and 50% are also investigated. The simulation results indicate that using  a DSM in multigenset  hybrid  mini grid  enhances system performance  considering  fuel  consumption, efficiency, the number of hours generator set work per day and cycling of the generator sets.