A significant number of islands have been forced to restrict the penetration level of renewable energy sources (RES) in their conventional electrical power systems. These limitations attempt to prevent problems that might affect the stability and security of the electrical system. Restrictions that may apply to the penetration of wind energy can also be an obstacle when meeting European Union renewable energy objectives. As a partial solution to the problem, this paper proposes the installation of a properly managed, wind-powered, pumped hydro energy storage system (PHES) on the island of Gran Canaria (Canary Islands). Results from a dynamic model of the island's power system show that the installation of a pumped storage system is fully supported in all circumstances. They also show that the level of wind penetration in the network can be increased. These results have been obtained assuming that two of the largest existing reservoirs on the island (with a difference in altitude of 281 m and a capacity of aprox. 5,000,000 m(3) each) are used as storage reservoirs with three 54 MW generators. Likewise, the ability of such facilities to contribute to the stability of the system is shown. This type of installation can reduce fossil fuel consumption, reducing CO2 emissions. Moreover, not only can the PHES improve wind penetration level, but it also allows the number of wind farms installed to be increased. Regions with geographically suitable sites and energy problems similar to those on the Canary Islands are encouraged to analyze the technical and economic feasibility of installing similar power systems to the one in this paper. Such systems have an enormous, unexplored potential within the general guiding framework of policies promoting clean, renewable energy. (C) 2011 Elsevier Ltd. All rights reserved.