More than 80% of electric loads need DC electricity rather than AC at the moment. If DC power could be supplied directly to the terminal loads, power conversion stages including rectifiers, converters, and power adapters can be reduced or simplified. Therefore, DC microgrids may be able to improve energy efficiency of power distribution systems. In addition, DC microgrids can increase the penetration level of renewable energy resources because many renewable energy resources such as solar photovoltaic(PV) generators, fuel cells, and batteries generate electric power in the form of DC power. The integration of the DC generators to AC electric power systems requires the power conversion circuits that may cause additional energy loss. This paper discusses the capability and feasibility of DC microgrids with regard to energy efficiency analysis through detailed dynamic simulation of DC and AC microgrids. The dynamic simulation models of DC and AC microgrids based on the Microgrid Test System in KEPCO Research Institute are described in detail. Through simulation studies on various conditions, this paper compares the energy efficiency and advantages of DC and AC microgrids.