An algorithm for optimal sizing of all the components of a stand-alone hybrid wind-diesel electrical power generation system, in the sense of minimum energy cost is reported in this paper. The total system reactive power balance condition, which is not often considered for designing stand-alone systems, is included with others in the nonlinear constrained optimization technique employed to maximize the wind turbine output. The dynamic performance of the hybrid system during different load and wind speed transients under optimal load sharing condition (as predicted by the aforementioned algorithm) between the two generators is verified in real time on a laboratory prototype of the hybrid system. These experimental results are also presented.