Among the several wind generation technologies, variable-speed wind turbines utilizing doubly fed induction generators (DFIG) are gaining momentum in the power industry. Increased penetration of these wind turbine generators displaces conventional synchronous generators which results in erosion of system frequency. With this assertion, the paper analyzes the dynamic participation of DFIG for frequency control of an interconnected two-area power system in restructured competitive electricity market. Frequency control support function responding proportionally to frequency deviation is proposed to take out the kinetic energy of wind turbine for improving the frequency response of the system. Impacts of varying wind penetration in the system and varying active power support from DFIG on frequency control have been investigated. The presence of thyristor controlled phase shifter (TCPS) in series with the tie-line and Superconducting Magnetic Energy Storage (SMES) at the terminal of one area in conjunction with dynamic active power support from DFIG results in optimal transient performance for PoolCo transactions. Integral gains of AGC loop and parameters of TCPS and SMES are optimized through craziness-based particle swarm optimization (CRPSO) in order to have optimal transient responses of area frequencies, tie-line power deviation and DFIG parameters. (C) 2011 Elsevier Ltd. All rights reserved.