The levelized cost of electricity (LCOE) is the main economic index for evaluating various power generation technologies. By introducing the LCOE to the optimal configuration of microgrid, an LCOE based evaluation method for islanded microgrid power supply is proposed, and an optimal allocation model for standalone microgrid power supply based on the minimum LCOE is established. The power output and reliability of the system are simulated based on Monte Carlo method. The genetic algorithm is used to solve the model. The simulation results verify the validity and rationality of the model, and the influences of the initial cost, fuel cost and reliability on the LCOE are analyzed. The established model can accurately evaluate the unit cost of each power supply, reasonably configure the capacity of the power supply and provides a new method for the power supply planning.