With　the　rapid　development　of　microgrid　and　large-scale　grid-connected　operation,　the　detection　and　location　of　short-circuit　faults　in　microgrid　has　become　a　bottleneck.　In　this　paper,　a　simulation　model　of　short-circuit　fault　in　low-voltage　AC　microgrid　is　built　on　PSCAD/EMTDC.　The　characteristics　of　current　wavelet　energy　spectrum　under　various　short-circuit　fault　states　are　studied　and　the　early　detection　of　faults　is　realized.　Based　on　the　relationship　between　the　first　peak　value　of　fault　current　wavelet　energy　spectrum　and　the　location　of　short-circuit　points,　a　method　for　early　detection　and　area　location　of　short-circuit　faults　in　microgrid　is　proposed.　The　simulation　and　experimental　results　show　that　this　method　can　detect　and　locate　the　short-circuit　fault　area　of　microgrid　quickly　and　accurately.　©　2010-2012　IEEE.