This paper proposes an optimal design of Static Synchronous Compensator (STATCOM) to enhance the dynamic performance of a grid-tied hybrid PV/wind energy system in Gabal El Zayt area situated along the Red Sea coast in Egypt. The design parameters of the STATCOM are optimized by using Particle Swarm Optimization (PSO) algorithm. Moreover, the effectiveness of the optimized STATCOM is validated during real-time changes of the climatic conditions in Gabal El Zayt region as a case study. Also, the credibility of the optimized STATCOM in improving the dynamic operation of the electrical grid is evaluated compared with that of the conventional control strategy during various load scenarios and a three-phase fault occurrence. The obtained results illustrate that the injected power from the hybrid system into the grid is augmented significantly when the optimized STATCOM is employed. Moreover, the optimized STACOM improves substantially the grid voltage and load voltage profile during the load disturbances and the fault incident. Additionally, with the optimized STATCOM support, the dynamic operation of the electrical utility is enhanced considerably by keeping always the grid power factor at unity.