A power conversion system is disclosed including a DC bus for receiving DC power, a power converter for converting the DC power to AC power, and a controller. The controller includes an active power regulator for generating a phase angle command signal, a reactive power regulator for generating a voltage magnitude command, and an active power (P) and reactive power (Q) decoupling unit for decoupling interaction between the active and reactive power regulators. The PQ decoupling unit includes an active power compensation element and a reactive power compensation element. The active power compensation element is used for generating a phase angle compensation signal based on a reactive power error signal, to compensate the phase angle command signal. The reactive power compensation element is used for generating a voltage magnitude compensation signal based on an active power error signal, to compensate the voltage magnitude command signal.