This paper presents modelling and control aspects of an isolated wind-diesel system equipped with a superconducting magnetic energy storage (SMES) unit. The SMES unit is located at the induction generators' terminal bus, for exchanging real and reactive powers in four quadrants, with the wind-diesel system. The system components are modelled by non-linear equations for accurate dynamic performance assessment and the SMES unit is modelled as a controllable current source. The control of the SMES unit is exercised through a multi-input-multi-output (MIMO) self-tuning regulator (STR). The STR uses the local voltage and frequency measurements and generates appropriate signals for the control of the SMES unit. The SMES coil current deviation forms a part of one of the regulated variables of the STR for achieving a continuous control. The complete model of the hybrid system is developed and the parameters of the STR are adjusted for quality improvement of the power supply under turbulent wind. The scheme is then tested for load disturbances. The simulation results show the positive impact of the proposed scheme on the quality of the power supply both under turbulent wind as well as load disturbances. Copyright (C) 2002 John Wiley Sons, Ltd.