Abstract Solar home systems are typically used for providing basic electricity services to rural households that are not connected to electric grid. Off-grid PV power plants with their own distribution network (micro/minigrids) are also being considered for rural electrification. A techno-economic comparison of the two options to facilitate a choice between them is presented in this study on the basis of annualised life cycle costs (ALCC) for same type of loads and load patterns for varying number of households and varying length and costs of distribution network. The results highlight that microgrid is generally a more economic option for a village having a flat geographic terrain and more than 500 densely located households using 3–4 low power appliances (e.g. 9 W CFLs) for an average of 4 h daily. The study analyses the viability of the two options from the perspectives of the user, an energy service company and the society.