Harnessing wind energy is the most rapidly growing amongst renewable energy sources. However, because of its intermittency in nature, wind power results in unfavorable influences on power system control, operation and stability. The voltage sag and flicker and grid frequency fluctuation are significant in this regard. To minimize the effect of wind power fluctuations and other contingencies on the grid frequency and AC-bus voltage, this paper presents a droop-fed vector control strategy based variable speed pumped storage (VSPS) system comprising the doubly fed induction machine. Modelling of the system is undertaken based on a phasor model technique. The case study is made by considering the droop-controlled VSPS plant in a grid containing conventional synchronous machines for hydropower and thermal power plants and an induction machine wind farm. The performance is validated and analyzed using a MATLAB/Simulink platform. The proposed droop-fed control model is compared with the conventional control strategy (without being droop-fed) and tested to wind power fluctuations, start-up transients, load variations and three-phase fault. The results show that the droop-fed vector control strategy of the VSPS plant achieves better dynamic and steady state controlling responses for grid frequency and AC-bus voltage in the power system than the conventional vector control scheme during wind power fluctuations and contingencies.