This paper primarily intends to develop a GIS (geographical information system)-based data mining approach for optimally selecting the locations and determining installed capacities for setting up distributed biomass power generation systems in the context of decentralized energy planning for rural regions. The optimal locations within a cluster of villages are obtained by matching the installed capacity needed with the demand for power, minimizing the cost of transportation of biomass from dispersed sources to power generation system, and cost of distribution of electricity from the power generation system to demand centers or villages. The methodology was validated by using it for developing an optimal plan for implementing distributed biomass-based power systems for meeting the rural electricity needs of Tumkur district in India consisting of 2700 villages. The approach uses a k-medoid clustering algorithm to divide the total region into clusters of villages and locate biomass power generation systems at the medoids. The optimal value of k is determined iteratively by running the algorithm for the entire search space for different values of k along with demand-supply matching constraints. The optimal value of the k is chosen such that it minimizes the total cost of system installation, costs of transportation of biomass, and transmission and distribution. A smaller region, consisting of 293 villages was selected to study the sensitivity of the results to varying demand and supply parameters. The results of clustering are represented on a GIS map for the region. (C) 2013 Elsevier Ltd. All rights reserved.