A new cost-based droop control method based upon generation cost and demand side cost management of the microgrid is proposed in this paper. At present

many droop control methods have been developed based on either the power rating or the generation cost of the distributed generation (DG) unit

without consideration of the demand side participation in the operation and control. This exclusion might not be appropriate

if different types of consumers are connected in the micro-grid systems. This study proposes a droop control method considering both DG and load operating cost characteristics in order to minimize the generation cost of the micro-grid.