The penetration level of renewable energy resources has grown in such a way that their effects on the power system can no longer be neglected. In order to cope with these problems, grid operators are forced to improve the stability of the grid connection point, and the static synchronous compensator (STATCOM), which has a fast dynamic response is emerging as an alternative. Due to the prohibitive cost of STATCOM, however, grid operators have begun applying a new concept of hybrid STATCOM, which is a combination of mechanically switched capacitors (MSCs) and STATCOM. Thus, this paper investigates the use of new coordinated control between STATCOM and MSCs, and the solution relies on the required reactive power estimation method using online grid strength level (OGSL) index, which is newly proposed in this paper, and the optimal MSCs allocation algorithm. Following the proposed procedure, an improved coordinated control scheme is obtained whose objective is to reduce the switching times of the MSCs while maximizing the reserve reactive power margin of the STATCOM in transient state. This proposal is analyzed on the Jeju island power system in South Korea with the developed hybrid STATCOM model.