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This paper presents a novel control strategy for a direct drive interior permanent magnet (IPM) synchronous generator based variable speed wind turbine with controlled energy storage. The overall control system consists of a machine side converter controller, a bi-directional dc-dc converter controller for battery energy storage management and load side inverter controller for voltage and frequency regulation. The machine side controller controls the generator speed in order to extract optimum power from the fluctuating wind. The machine side controller is also responsible to achieve maximum efficiency operation of the generator by regulating the d- and q- axis components of stator current. A bi-directional dc to dc battery controller is utilized to balance power generation from the wind and load requirements during wind fluctuations. The load side inverter controller regulates the output voltage and frequency under varying wind and load conditions. The extensive simulation results confirm the effectiveness of the proposed controllers for the wind-battery energy storage based standalone power generation system.