A micro grid (MG) is a small-scale power system consisting of a group of distributed generators and loads which behave as one and controllable unit compared to the grid. This paper Design and analysis of upqc integrated Microgrid system is introduced and the performance of proposed microgrid on Voltage sag, swell and Reactive Power Compensation is discussed. Conversely, due to its erratic generation of DGs, some power quality (PQ) events have been developed to dispel PQ concerns caused by MG integration. Because of the high penetration of the DG units (distributed generation) with a range of loads, microgrids might experience power quality and control problems and Reactive Power Adjustment is yet to be a problem in grid linked mode due to nonlinear loads. A new technology known as custom power devices (UPQC) is proving to be an effective solution to the issue of power quality. The shunt compensator of the UPQC compensates harmonics in the load current. Issues with grid side power quality are addressed by the series compensator by applying the relevant or pertinent voltage in phase with the grid voltage. The traditional grid system is firstly modeled and simulated with a nonlinear load. The microgrid has been introduced subsequently. Microgrid comprises of two renewable energy sources such as wind turbine and a PV cell.