Modeling and optimization of a residential solar-powered stand-alone power system comprising photovoltaic (PV) arrays and secondary batteries are presented. Moreover, an economic study is performed to determine the cost of electricity (COE) produced from this system so as to determine its competitiveness with the conventional sources of electricity. All of the calculations are performed using a computer code developed by using MATLAB. The system output was calculated for Cairo city (30°01′N, 31°14′E) in Egypt. It was found that dual-axis solar tracking is not economically feasible while cooling of the PV surface helps to lower the COE of the system. Also, the average maximum efficiency of the modeled 200 W solar cells was 14.16%. The system which has an efficiency of 12% showed a great ability to satisfy the estimated demand load. The COE obtained from the system was found to be 41.7 cents/kWh over 20 years of its operation with an expected future cost of 31 cents/kWh.