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This paper proposes a novel control scheme to minimize the disturbance on the PV fed distributed generation system output power in spite of a wide variation in the solar radiation level. The proposed scheme makes use of high energy density ultracapacitor to absorb the effect of intermittent solar radiation. In the event of a sudden fall in the PV power, the presented scheme provides sufficient margin to the other sources (e.g. hydro, steam turbine, etc.) connected to the system to take over. A notable feature of this scheme is that it does not disturb the MPPT of the trackers associated with the PV panels. The control strategy uses an inner fast current control loop and an outer slow voltage control loop for both voltage source inverter and ultracapacitor converter. The loops are designed using the small signal modeling of the system. Simulation results are presented in support of the effectiveness of the proposed technique. A prototype is developed with the available 2kW PV installation and ultracapacitor bank. Hardware results are included to validate the analysis and simulation results of the proposed control strategy.