Abstract Rural Ethiopia has significant untapped potential for hydro and solar energy generation systems. However, challenges arise from seasonal variations and unfavourable topographic positions of flowing rivers, hindering the efficient exploitation of these resources. Despite the country’s abundance in hydro and solar energy resources, >75% of the population still lack access to electricity from the national grid. This work deals with energy resource potential assessment and techno–economic analysis of micro hydro–photovoltaic (PV) hybrid systems, considered in the case study of Goda Warke village, located in the Yaya Gulele district. A novel framework is proposed that utilizes the Natural Resource Soil Conservation Service curve number method to assess the energy potential of micro-hydro energy in ungauged basins, specifically at the exit point of the Girar River basin catchment. The average monthly flow rate in the basin is 0.975 m3/s, while the area exhibits a solar radiation potential of 5.39 kWh/m2/day. Energy policy promotes expanding access to modern energy sources and utilization of indigenous energy resources. Simulation results indicate that the hydro/PV/diesel generator (DG)/battery and hydro/PV/battery systems are the most optimal choices based on net present cost, with the inclusion of a DG for economic comparison. Micro-hydro energy covers most of the electric load in the area, achieving a capacity factor of 47.5%. The cost of energy and net present cost were found to be sensitive to variables such as the price of diesel fuel, pipe head loss, and the growth of the village load. The optimized system demonstrated a hydro energy potential of 1405.37 MWh/year and a PV energy output of 274.04 MWh/year, resulting in a levelized cost of energy of 0.0057 and 0.049 $/kWh for the hydro and PV components, respectively.