The aim of this study is to develop an algorithm for ensuring optimal operation of isolated microgrids. The generic microgrid considered consists of a set of distributed controllable generators integrated to a distribution network which give electrical supply in a local area. The algorithm is proposed to operate AC microgrids constituted by a photovoltaic power plant, synchronous diesel generators, energy storage capacity and loads. The optimization algorithm, based on linear programming, maximizes renewable power generation, minimizes diesel consumption and ensures an appropriate management of the batteries without compromising the frequency stability of the system. The energy management generates a day-ahead schedule and setpoints for the distributed energy resources and the energy storage system. © 2017 IEEE.