This paper presents the analysis of fault transient characteristics of microgrid equipped with renewable energy sources. The typical microgrid models have been developed and employed to simulate variety fault situations of microgrid system on PSCAD/EMTDC. Simulation results show that the initial transient fault current has been limited in small scale. The limited fault current increased slowly to such an extent that traditional fault component based protection fail to obtain the operation value. Furthermore, the performance of traditional protection cannot to a large extent satisfied the requirements of microgrid with converter interfaced renewable energy sources. The novel solutions of protection have been proposed and discussed in the last part of this paper.