This work assesses the potential of demand response on isolated hybrid renewable energy systems, in order to optimize the systems' dispatch by minimizing the operation costs and the peak demand. The developed methodology models the implementation of solar thermal systems to replace non-renewable systems for the domestic hot water supply, and a demand response strategy to manage the electric backup required from the grid, in days of low solar radiation. The implementation of this system is compared between 10 isolated islands with different scales and energy systems in order to identify the potential energy savings introduced by solar thermal systems with demand response capabilities under different conditions. The results show larger savings for small islands, where the load pattern is essentially residential, especially for those with more than 25% share of renewable electricity. Regarding bigger islands, where the services and industry sectors dominate the load pattern, this implementation shows little technical and economic impact. In terms of environmental impact, this methodology shows that the combination of solar thermal systems with demand response programs may result, on average, in less 88% CO2 emissions than using non-renewable DHW systems. (C) 2017 Elsevier Ltd. All rights reserved.