This paper presents the reliability evaluation for a microgrid composed of conventional generators (CGs), a photovoltaic (PV) system, and a small hydropower plant (HPP). The PV system has an intermittent output and the HPP output is limited depending on several constraints. Therefore, their reliability evaluation should be performed according to the CGs. This paper proposes a methodology to evaluate the reliability of the microgrid based on Monte Carlo simulations. To this end, a simple operational strategy for the HPP and reliability models for each component of the grid are introduced. By the operational strategy consisting of two stages, the HPP would be operated to generate power whenever water stored in the reservoir exceeds a certain threshold (called volume reference) or to discharge extra water when it is beyond the maximum volume of the reservoir. To demonstrate the proposed methodology, a case study is performed according to various volume references, and the results are obtained in terms of several reliability indices. Further, the appropriate volume reference is determined considering a trade-off relationship between the reliability and economics aspects.