A method for effectively utilizing energy storage components within a microgrid may include the steps of connecting a first plurality of energy storage components to a DC bus through switches, connecting a second plurality of energy storage components to an AC bus through inverters, connecting controllers to the energy storage components, connecting a first plurality of the controllers to the DC bus to regulate bidirectional flow of energy between the DC bus and the first plurality of energy storage components and connecting a second plurality of the controllers to the AC bus to regulate bidirectional flow of energy between the AC bus and the second plurality of energy storage components. The controllers may be interconnected with a local energy storage system bus and controlled via a master microgrid controller connected to the local energy storage system bus. The controllers may have a state of charge and a state of health algorithm adapted to measure the state of charge and the state of health of the energy storage components under dynamic charge or discharge conditions.