In this paper, a microgrid consisting of a fixed speed diesel generator and renewable energy sources (Photo Voltaic and PMSG based variable speed Wind Energy Conversion Systems) have been considered. The photo voltaic source is operated in a derating mode and the wind generator in inertia control mode in order to mitigate the active power imbalance in the microgrid. An advanced photo voltaic derating algorithm is introduced based on the rate of change of PV power with respect to the voltage. This coordinated control limits the ramp rate of the diesel generator and operates it in the economical operating zone. The control scheme is tested for change in solar irradiation and load demand. © 2015, IFAC (International Federation of Automatic Control) Hosting by Elsevier Ltd. All rights reserved.