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In power systems, superconducting fault current limiters (SFCLs) can limit the prospective short-circuit currents to lower levels, so that the underrated switchgear can be operated safely. This paper presents a detailed theoretical analysis of improving power system stability by using SFCLs. Electromagnetic Transient Program (EMTP) simulation results based on a model system also show that SFCLs are effective for enhancing the transient stability of electric power systems by restraining the generator rotors from accelerating after faults and improving power quality. This paper outlines the basic application guidelines for using superconducting fault current limiters in different voltage-level power systems. In order to insure the safe and proper usage of SFCLs, some future considerations on the interaction between SFCLs and power systems are presented as well.