This paper proposes a novel algorithmic approach to compensate the reactive power using distribution static compensator (DSTATCOM) for wind energy conversion system (WECS). Three phase bidirectional converter is utilized to exchange real and reactive power in both directions. The plug-in hybrid electric vehicle (PHEV) is enabled to consume during excess power availability. The battery is connected through a separate bidirectional DC-DC converter to adjust the power at the desired range. The compensated reference current is being generated based on the load requirement, wind power generations and state of charge (SOC) status. The proposed algorithmic approach helps to stabilize the grid by injecting accurate compensating current at the point of common coupling (PCC). Thereby, the proposed approach ensures the grid at balanced states under all operating cases. In order to validate the proposed approach, different case studies have been considered and validated through simulation results using PSCAD/EMDTC software. (C) 2019 Hydrogen Energy Publications LLC. Published by Elsevier Ltd. All rights reserved.