With the continuously challenges of energy and environmental, the development of distributed power generation technologies focused on renewable energy is rapidly advancing. Microgrid based on inverter power source is the important form of distributed generation, but it is difficult to isolate faults selectively and accurately when short circuit fault occurs in grid, and will result in overall shutdown. Aimed at the characteristics of inverter power sources and microgrid structures, a protection method based on equivalent distance for lines of source-grid-storage microgrid is proposed. Realtime information of the fault line is modulated into the terminal frequency by modulation techniques. Subsequently, virtual short-circuit currents are obtained via demodulation techniques, and fault distances are measured through equivalent internal potential. It is verified by theoretical analysis and simulation experiments in four tipical cases, such as single power source circuits, and this method can effectively calculate virtual short-circuit currents. These currents are equevlant to the virtual currents output when traditional rotating motors act as power sources. The proposed method can use the aforementioned virtual short-circuit current to determine the distance between the inverter power source and the fault point.