The study presents a new HHT-based method of differential energy protection on the basis of the microgrid differential protection, aiming at the features of microgrid bi-directional power flow and large difference in fault current when operating in grid-connected and islanded modes. Hilbert spectra are obtained by Hilbert-Huang Transform (HHT) of the currents at both ends of the faulty line, and the spectrum energy is calculated. Whether it is an intra-area or out-area fault can be decided by checking if the differential energy exceeds the threshold, without needing to change the thresholds of different fault types. A 10 kV microgrid model is set up in PSCAD and example validation is conducted in Matlab. A large number of simulations demonstrate that this method can reliably detect all kinds of faults under both grid-connected and islanding operation conditions and effectively solve the problem of High Impedance Fault (HIF) protection failure. This work is supported by Youth Science Fund of National Natural Science Foudation of China (No. 61403127).