Due to continuous exploitation of oil and gas reserves combined with the effect of global warming has brought renewed interest in alternative energy sources. Renewable power resources are safe, clean, and abundant in nature. Recent research and development in renewable power generation techniques such as photovoltaic, wind has shown excellent potential towards building a sustainable energy economy in the next decade. The energy sources and connecters need to be integrated to meet sustained load demand while considering the natural whether conditions. The paper focuses on the combination of wind and photovoltaic system to ensure that system performs under all conditions. The system consists of a wind generator and alternate energy conversion systems such as PV cells. However, due to the power fluctuation of renewable energy sources, voltage and frequency deviations are occurred in island power systems whose ability to maintain stable supply-demand balance is low. Therefore, it is necessary to control the system frequency and voltage. From this viewpoint, a smart grid, which maintains stable supply- demand balance, is necessary. The proposed system has advantages of both dc and ac grids. Output from the wind, PV cell and battery are maintained at same voltage and connected to the common DC bus while the conventional power supply modeled as three phase voltage source and several controllable loads of different capacities are connected to the AC bus. The system is analyzed under fault conditions. The Model is developed using MATLAB- Simulink. © 2011 Praise Worthy Prize S.r.l. - All rights reserved.