This work deals with a renewable energy based microgrid (MG) for standalone operation. The places, where renewable energy sources such as wind, solar, hydro, etc., are in abundance, use them to generate electricity by developing wind–hydro based MG. The main control unit of MG is voltage source inverter (VSI) in which an indirect current control is applied. This VSI is used for power quality improvements through harmonics suppression of nonlinear loads; voltage regulation during contingencies such as load unbalance; and reactive power compensation at point of common coupling according to the system requirement. It is capable of providing power balance under various changes among the generation, storage, and demand units. For appropriate functioning of VSI, a reweighted zero attractor least mean square control algorithm is applied to generate pulsewidth modulation switching pulses for VSI. A model of MG is developed in MATLAB/Simulink environment to simulate its performance in normal and dynamic conditions at linear and nonlinear loads.