This article presents the performance evaluation of the solar photovoltaic small hydro battery based energy storage (BES) system having automatic mode switching capability. A BES allows the microgrid to operate in constant power mode depending upon the maximum power of a battery. Moreover, a block sparse proportionate least mean M-estimate algorithm is utilized for the system to operate in the variable power mode of the utility grid. A dc offset rejection loop is included to eliminate the offset from the load currents. A synchronization unit is employed that signals the static transfer switch to transfer between utility-interactive mode (UIM) and standalone mode (SM). The estimation of frequency is required for the system to synchronize with the utility grid, which is accomplished using a frequency adaptive filter. A comprehensive description of the system, in various operating modes, is given, i.e., SM, UIM, transition from SM to UIM, and transition from UIM to SM. Besides, the microgrid is validated with a hardware prototype and the synchronization is achieved by complying with the standards of voltage, phase angle difference, and frequency as mentioned in the IEEE 1547-2018 standard. The power quality index of the grid and hydro generator attributes in the utility mode and under load unbalance in the SM is provided, which complies with the IEEE 519 standard. Comparative performance is provided to depict the robustness of the control algorithm.