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Micro-grid system is currently a conceptual solution to fulfill the commitment of reliable power delivery for future power systems. Renewable power sources such as wind, hydro offer the best potential to supply free power for future micro-grid systems. A micro grid consists of six parallel operated self excited induction generators driven by either wind or hydro system. The self excited induction generators (SEIG) with reactive power compensator are used for improving voltage regulation. An adjustable reactive power source is required to maintain constant grid voltage with varying load. The required reactive power can be provided by VAR compensator which consists of solid state self-commutating devices along with DC sources. Selection and ratings of these components for self commutating devices are quite important for optimal design of VAR compensator. In this paper design of micro grid is proposed which consist of six parallel operated systems. If a fault occurs in any one of the generating unit then the VAR compensators has to maintain constant voltage of micro grid at varying load.