Abstract This study proposes a hybrid energy storage system (HESS) composed of the superconducting energy storage system (SMES) and the battery. The system is designed to compensate power fluctuations within a microgrid. A novel control method is developed to share the instantaneous power between the SMES and the battery. The new control scheme takes into account the characteristics of the components of the HESS, and the battery charges and discharges as a function of the SMES current rather than directly to the power disturbances. In this way, the battery is protected from the abrupt power changes and works as an energy buffer to the SMES. An new hardware-in-loop experiment approach is introduced by integrating a real-time digital simulator (RTDS) with a control circuit to verify the proposed hybrid scheme and the new control method. This paper also presents a battery lifetime prediction method to quantify the benefits of the HESS in the microgrid. A much better power sharing between the SMES and the battery can be observed from the experimental results with the new control method. Moreover, compared to the battery only system the battery lifetime is quantifiably increased from 6.38 years to 9.21 years.