A new model reference adaptive system based estimation technique for vector control of real and reactive power of a brushless doubly fed reluctance generator without a shaft position sensor is proposed. The rotor speed is being precisely observed in a closed‐loop manner by eliminating the error between the measured and estimated inverter‐fed (secondary) winding current angles in a stationary frame. Contrary to the existing model reference adaptive system observer designs reported in the brushless doubly fed reluctance generator literature, the reference model is entirely parameter‐free and only utilises direct measurements of the secondary currents. Furthermore, the current estimates coming from the adaptive model are obtained using the measured voltages and currents of the grid‐connected (primary) winding, which has provided prospects for much higher accuracy and superior overall performance. The realistic simulations, preliminary experimental results, and the accompanying parameter sensitivity studies have shown the great controller potential for typical operating conditions of variable speed wind turbines with maximum power point tracking.