This paper proposes a novel energy and power management algorithm for AC microgrid operating with limited power sources, to ensure power quality and stability of the main grid. In a microgrid system, the renewable energy sources (RES) are commonly associated with conventional power sources and energy storage devices, due to the variety of the former. However, how to utilize the RES and energy storage system to constantly and steadily supply the loads, further more how to supply extra power to or draw necessary power from the main grid, is an essential issue when there is limited power sources of the microgrid if without a conventional power source. This paper solves that issue through an energy management algorithm. Simulation is conducted and results verify the proposed method.