Small signal oscillation has been always a major concern in the operation of power systems. In a generator, the electromechanical coupling between the rotor and the rest of the system causes it to behave in a manner similar to a spring mass damper system. Following any disturbance, such as sudden change in loads, actuations in the output of turbine and faults etc. it exhibits an oscillatory behaviour around the equilibrium state. The use of fast acting high gain AVRs and evolution of large interconnected power systems with transfer of bulk power across weak transmission links have further aggravated the problem of these low frequency oscillations. Small oscillations in the range of about 0.1Hz to 3.5Hz can persist for long periods, limiting the power transfer capability of the transmission lines. These oscillations can be reduced by incorporating auxiliary controllers on generator excitation system. Power System Stabilizers (PSSs) were developed to produce additional damping by modulating the generator excitation voltage. Designing effective PSS for all operating conditions especially in large interconnected power systems still remains a difficult and challenging task. More and more power electronic based controllers have been and will be used in power systems. Many of these controllers such as Static Var Compensators (SVCs), Static Synchronous Compensators (STATCOMs) and Unified Power Flow Controllers (UPFCs) etc., are incorporated in power transmission networks to improve its operational capability. In addition, some of the energy storage systems such as Battery Energy Storage systems (BESS), Super conducting Magnetic Energy Storage System (SMES) as well large non-conventional energy sources are also increasingly being integrated with the power grid. With large integration of these devices, there is a significant impact on system stability, more importantly on small signal oscillatory instability of the power system. This thesis primarily focuses on impact of such devices on small signal oscillatory stability of the power systems. More specifically in this thesis small signal stability analysis of a Single Machine Infinite Bus (SMIB) system with a grid connected wind powered Permanent Magnet Synchronous Generator (PMSG) has been presented. A SMIB system has been purposely chosen so that general conclusions can be obtained on the behaviour of the embedded STATCOM/Energy Source (ES) system on system stability. With a better understanding of the impact of such a system it would be probably possible to analyze more complicated multimachine power system and their impact on system stability. Small signal model of the complete system which comprises the generator, transmission network, inter connecting STATCOM, the wind power generator and all associated controllers has been developed. The performances of the system following a small disturbance at various operating conditions have been analyzed. To obtain quantitative estimates of the damping and synchronizing torques generated in the system, expressions for damping and synchronizing torque clients have been developed. With these analyses, the relative impact of the STATCOM and STATCOM with ES on system performance have been assessed. It is shown that with active and reactive power modulation capabilities effective and efficient control of small signal oscillations in power systems can be achieved.