Renewable-energy-based microgrids are a better way of utilizing renewable power and reduce the usage of fossil fuels. Usage of energy storage becomes mandatory when such microgrids are used to supply quality power to the loads. Microgrids have two modes of operation, namely, grid-connected and islanding modes. During islanding mode, the main responsibility of the storage is to perform energy balance. During grid-connected mode, the goal is to prevent propagation of the renewable source intermittency and load fluctuations to the grid. Energy storage of a single type cannot perform all these jobs efficiently in a renewable powered microgrid. The intermittent nature of renewable energy sources like photovoltaic (PV) demands usage of storage with high energy density. At the same time, quick fluctuation of load demands storage with high power density. This paper proposes a composite energy storage system (CESS) that contains both high energy density storage battery and high power density storage ultracapacitor to meet the aforementioned requirements. The proposed power converter configuration and the energy management scheme can actively distribute the power demand among the different energy storages. Results are presented to show the feasibility of the proposed scheme.