This paper describes an undergraduate or graduate level student project that involves the design of an energy-efficient standalone distributed generation system integrating existing fossil fuel based energy sources with renewable energy sources and smart grid technologies for off-grid communities. One such application is the development of stand-alone electric power sources for Native American villages in rural Alaska. This student project addresses many facets of engineering design and development including system component design, system integration including smart grid technology, environmental impacts, and economic and cultural concerns. The design requires consideration of all possible energy sources and energy conversion alternatives in the development of a standalone distributed generation system, and depends on the power requirements and location, as well as environmental, economic, and cultural concerns. System efficiency is determined, including the possibility of utilizing waste thermal energy. Available energy sources may include wind, solar, small head or river hydro, thermoelectric generators, micro-turbine technology, and thermoelectric systems, battery and other energy storage devices combined with the existing diesel/electric or gasoline/electric generators. Environmental impacts include calculations of emissions and avoided costs of integrating renewable energy sources into the system. Economic considerations include the life cycle cost and estimated unit cost of electricity generated.