Abstract: With the wide application of new energy power generation, the economic interest of microgrid is the key factor to achieve an environment-friendly power supply. Scholars have done a lot of research on microgrid models, but the existing models fail to show the importance of renewable energy in microgrid operation. Therefore, a microgrid generation and storage model based on renewable energy and energy storage system is proposed. In order to minimize the cost and the carbon dioxide emissions, the generation and storage as well as the production costs of electric energy in microgrid are analyzed in detail. The microgrid consists of a photovoltaic power plant, a wind turbine, a diesel, and a gas generator as a power generation equipment, a battery energy storage system as an energy storage equipment and a small hydraulic reservoir. The simulation of the power production and storage process of the microgrid in the distribution network is carried out by using the FICO Xpress programming optimization tool. The result shows that the use of the energy storage system can greatly reduce the generating capacity of thermal power units, and also help to reduce the operating cost of thermal power units. In addition, the simulation results are in accordance with the proposed model for analyzing power production and storage in the microgrid.