Microgrids are small-scale power systems that can operate while connected to a traditional grid or independently. They consist of distributed energy resources like generators, storage systems, and controllable loads managed by a central controller. Microgrids can operate in grid-connected mode, importing and exporting power bi-directionally for economic benefit. They can also operate islanded from the main grid to provide reliable power. Combined heat and power systems are efficient as they sequentially produce both electricity and usable heat from the same fuel input. Microgrids provide benefits like utilizing more renewable energy, higher reliability, reduced emissions, and lower costs compared to traditional grids.