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This paper discusses the economic analysis and environmental impacts of integrating a photovoltaic (PV) array into diesel-electric power systems for remote villages. MATLAB Simulink is used to match the load with the demand and apportion the electrical production between the PV and diesel-electric generator. The economic part of the model calculates the fuel consumed, the kilowatthours obtained per gallon of fuel supplied, and the total cost of fuel. The environmental part of the model calculates the CO2, particulate matter (PM), and the NOx emitted to the atmosphere. Simulations based on an actual system in the remote Alaskan community of Lime Village were performed for three cases: 1) diesel only; 2) diesel-battery; and 3) PV with diesel-battery using a one-year time period. The simulation results were utilized to calculate the energy payback, the simple payback time for the PV module, and the avoided costs of CO2, NOx, and PM. Post-simulation analysis includes the comparison of results with those predicted by Hybrid Optimization Model for Electric Renewables (HOMER). The life-cycle cost (LCC) and air emissions results of our Simulink model were comparable to those predicted by HOMER.