Microgrid systems have been adopted globally to implement the renewable energy-based electrification, but constant power load (CPL) has caused instability issues. To improve the stability of the microgrid system, a virtual impedance-based load side compensation technique is used. In this paper, to implement this storage-based compensation technique, the hybrid energy storage system (HESS), with a battery unit as well as ultracapacitor unit, is introduced to reduce the deficiency in the case of using either battery-only or ultracapacitor-only storage system and offer the combined features with higher energy and higher power density. Here, the storage will provide high power density with quick charging/discharging time and the ultracapacitor will compensate the transient demand for a short period of time; therefore compensating the required power by the combined features of its constituents. Besides HESS is operated by a simple implementable algorithm, it improves overall efficiency, cost effectiveness, life span; reduce the energy storage size and stress on the battery. This proposed system adds up to the existing and ongoing research work in this field by providing a new way to counter the problems faced because of constant power loads in microgird systems. Along with introducing a combination of load side compensation, HESS and ultra capacitor this work would go a long way in reducing battery size, stress on battery and increase efficiency by improving battery reponse time and percent overshoot in volatge. To verify the performance of the proposed system, necessary results performed at Matlab/Simulink platform are presented in this paper.