The palm oil industry potentially can be environmentally sustainable through utilizing the vast availability of biomass residues from palm oil mills as renewable energy sources. This work addresses the optimal operation of a combined bioenergy and solar PV distributed energy generation system to meet the electricity and heat demands of an eco-community comprising a palm oil mill and its surrounding residential community. A multiperiod mixed-integer linear programming planning and scheduling model is formulated on an hourly basis that optimally selects the power generation mix from among available biomass, biogas, and solar energy resources with consideration for energy storage and load shifting. A multiscenario approach is employed that considers scenarios in the form of many possible weather conditions and various energy profiles under varying mill operation modes and residential electricity consumption. The proposed approach is demonstrated on a realistic case study for a palm oil mill in the Iskandar Malaysia economic development region. The computational results indicate that biomass-based resource is the preferred renewable energy to be implemented due to the high cost associated with solar PV. As well, load shifting and energy storage can be feasibly deployed for demand peak shaving particularly for solar PV systems. © Springer-Verlag Berlin Heidelberg 2014.