Microgrid solutions can incorporate clean renewable energy and operate autonomously to power remote areas unreachable by the main grid. While microgrids have thus attracted the interest of many electricity operators, some suggest that renewable energy is not as environmentally friendly as it is claimed to be. This study investigates the life cycle environmental impacts and energy payback time (EPBT) of a microgrid through a life cycle assessment (LCA) case study of the Town Island Microgrid, the first standalone hybrid renewable energy commercial microgrid in Hong Kong. The environmental performance of the Town Island Microgrid was further tested against 2 electrification options, including an on-site diesel generator system and a grid extension. Our results indicate that the Town Island Microgrid is the least impactful in 8 impact categories out of 12. For instance, the global warming potential (GWP) of the diesel generator system and the grid extension was 4.3 times and 7.8 times greater than that caused by the microgrid, respectively. The EPBT for the microgrid was 9.2 years, while the grid extension and the diesel generator EPBT values were 6.4 and 10.1 times longer than that of the microgrid, respectively. In conclusion, the case study provides substantial evidence that a microgrid solution can deliver a significantly superior life cycle environmental performance than other common electrification options.