Microgrids have been proposed as a way of integrating large numbers of distributed renewable energy sources with distribution systems. One problem with microgrid implementation is designing a proper protection scheme. It has been shown that traditional protection schemes will not work successfully. In this paper a protection scheme using digital relays with a communication network is proposed for the protection of the microgrid system. The increased reliability of adding an additional line to form a loop structure is explored. Also a novel method for modeling high impedance faults is demonstrated to show how the protection scheme can protect against them. This protection scheme is simulated on a realistic distribution system containing a high penetration of inverter connected Distributed Generation (DG) sources operating as a microgrid. In all possible cases of operation the primary and secondary relays performed their intended functions including the detection of high impedance faults. This system is simulated using Matlab Simulink’s SimPowerSystems toolbox to establish the claims made in this paper