Model‐based speed estimation schemes in sensorless field‐oriented control (FOC) of induction machines (IMs) are designed on the basis of a corresponding mathematical model. Thus, a reliable and robust sensorless controller requires using a more detailed IM model. The omission of nonlinear phenomena in real‐time application, such as magnetic saturation, iron losses, and stray‐load losses, certainly leads to inaccuracy in the estimated speed due to the existence of the mentioned phenomena in the IM. In this context, we address here the problem of neglecting the stray‐load and iron losses in a model‐based speed observer, synthesized by means of sliding mode theory, and we evaluate the impact of this omission on the execution of the utilized FOC and maximum power point tracking (MPPT) algorithm applied for a stand‐alone wind energy conversion system (WECS). The performance of the proposed sliding mode speed observer (SMSO), derived from the IM model including the above mentioned nonlinear phenomena, is experimentally evaluated over wide ranges of wind speed and IM magnetizing flux. It is also compared with the model reference adaptive system (MRAS) speed estimator, which is derived from the same IM model, as well as to the simplified SMSO, designed based on the IM model without stray‐load and iron losses. The obtained results show that the proposed SMSO has greater robustness with respect to abrupt variations of the rotor flux in comparison with the MRAS speed estimator, whereas it ensures significantly more stable operation and lower speed estimation error in comparison with the simplified SMSO.