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The electrical networks are receiving more deployments of Distributed Energy Resources (DERs). In order to control the impact of DERs on existing networks, it is proposed to divide them into more manageable smaller sets which are called `microgrids'. Unlike conventional utility grids, microgrids include generators, storage devices and loads at all levels of the system. Power generation, distribution and consumption levels are not discrete and power flow may occur at any direction. At any point in time, the microgrid may become isolated from the utility grid and continue its operation under islanding conditions. Furthermore, some microgrids may have changing structures with alternative paths and the coupling point for a device or a part of the microgrid may change due to the altering conditions. In order to sustain a safe operation in such a versatile and dynamic structure which has numerous parameters and variables, a new management strategy that has communication lines is required. The need of an extensive communication between the microgrid components is widely accepted in the Power Engineering field. In an effort to standardize the communication methods and modeling IEC 61850 is issued by International Electrotechnical Commission. Currently, there are studies underway to extend this standard with IEC 61850-7-420 so that DERs are also modeled in a standard way. This paper focuses on the communication challenges in a microgrid system, a review of IEC 61850 and the implementation of IEC 61850-7-420 for DER modeling.