In this paper, the utilization of hybrid AC/DC micro grids as a reactive power compensator is investigated. Wide Area Monitoring (WAM), Wide Area Protection (WAP), and Wide Area Control (WAC) systems will enhance the future of Smart Grid operation in terms of reliability and security. A proposed architecture for a hybrid AC/DC Smart Grid hardware test-bed system is presented. Design details of the various components and their connectivity in the overall system architecture are identified. The utilization of the DC side of the network as a reactive power source to the main grid is developed and presented. In order to allow this reactive power compensation process and voltage regulation on the AC side, a vector decoupling controlled pulse width modulation (PWM) voltage source inverter (VSI) was used as an interface between the DC micro grid and the main AC grid. This converter has the capability of controlling the active and reactive power independently. Hence, any extra power available from renewable energy sources connected to the DC micro grid will be used to regulate the voltage on the AC side. Experimental results were obtained from a hardware test-bed system totaling 72 kW (with 35 kW on the AC side and 37 kW on the DC side) to verify the ideas and concepts presented in the paper. Experimental and simulation results show excellent comparisons.