Summary
The distributed generations (DGs) of an islanded microgrids (MGs) comprises of interconnecting primary and secondary control layers. The interactions among these controllers may yield new oscillatory modes with low damping, which decrease the stability margins. As the distribution network is dynamic in nature, the maintenance of system stability is of great concern, mainly while operating in autonomous mode. This paper proposes the optimal internal model control (IMC)‐based droop control scheme to improve the small‐signal stability and transient‐response of an inverter‐based MGs (IMGs) under different operating conditions. The proposed optimal scheme is achieved with the following approach: (a) first, comprehensive small signal model is prepared for the study system, and the interaction of the control parameters which influence the system stability are investigated through eigenvalue analysis, (b) the critical values of the significant parameters of the IMC and droop controllers are sorted out, and their corresponding stability domain is formulated, (c) based on the stability domain, PSO optimization technique is employed to generate optimal values, which delivers effective coordination among the crucial control parameters to improve the stability, (d) the developed optimal control scheme is cross‐validated by comparing with the existing methods from the literature. The effectiveness of the proposed optimal scheme is subsequently assessed quantitatively with the help of time‐domain specifications.