Due to the uncontrollable generators, islanded microgrids powered only by renewable energy require costly energy storage systems. Energy storage needs are amplified when load and generation are misaligned on hourly, monthly, or seasonal timescales. Diversification of both loads and generation can smooth out such mismatches. However, the ideal type of battery to smooth out remaining generation deficits will depend on the duration(s) that energy is stored. This study presents a controls co-design approach to design an islanded microgrid, showing the benefit of hybridizing tidal and solar generation and hybridizing lithium-ion and flow battery energy storage. The optimization of the microgrid’s levelized cost of energy is initially studied in grid-search slices to understand convexity and smoothness. Then, a particle swarm optimization is proposed and used to study the sensitivity of the hybrid system configuration to variations in component costs. The study highlights the benefits of controls co-design, the need to model premature battery failure, and the importance of using battery cost models that are applicable across orders of magnitude variations in energy storage durations. The results indicate that such a hybrid microgrid would currently produce energy at five times the cost of diesel generation, but flow battery innovations could bring this closer to only twice the cost while using 100% renewable energy.