The small signal stability of power systems integrated with fallback large‐scale distributed energy resources is of utmost importance during the perturbation conditions. Among the various renewable resources in power systems: photovoltaic, fuel cell, wind turbine, diesel engine, aqua electrolyser, battery, ultra‐capacitor, and flywheel is becoming more favored in last decades. AGC, a main control system of frequency modulation, must correctly alleviate the low frequency oscillations caused by the perturbation and variable output power of renewable resources. In this regard, FOBELBIC is here introduced to enhance the damping capability of AGC. Since both the frequency and tie‐line power oscillations must be concomitantly alleviated, the small signal stability problem has been multi‐objectively formulated. Due to the exploration capability of MOALO, it has been chosen to extract the optimal parameters of FOBELBIC. Furthermore, MOPSO, MOBA, and NSGA‐II have been studied to demonstrate the capability of MOALO. To verify and validate the damping performance of suggested controller, it has been evaluated in three‐area reconstructed power system under the load perturbations as well as wind speed and sun radiation variations, and at the same time compared with BELBIC and PID controllers. Finally, the simulation results have evidently confirmed the damping the performance of MOALO‐based FOBELBIC to enhance the small signal stability of hybrid power system. © 2019 American Institute of Chemical Engineers Environ Prog, 38:e13146, 2019