A Microgrid is an aggregation of electrical/heat loads and small capacity on-site microsources operating as a single-controllable unit at the distribution voltage level. Conceptually, Microgrids should not be thought of as conventional distribution networks with additional local generation. In a Microgrid the microsources have sufficient capacity to supply all the local loads. Microgrids can operate both in synchronism with the utility (grid-connected mode) and in autonomous power islands (stand-alone mode). The operating philosophy is that under normal condi tion the Microgrid would operate in the grid-connected mode but in case of any disturbance in the utility, it would seamlessly disconnect from the utility at the point of common coupling (PCC) and continue to operate as an island.