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The area‐level coordination of regulation capacity by automatic generation control (AGC) is an effective approach to mitigate wind power fluctuations in interconnected power system with high wind penetration. However, the applicability of this method is restricted by the existing AGC strategy. For this reason, power systems in China are experiencing serious wind curtailments to meet the power balance. In this study, a distributed coordination AGC strategy based on regulation marginal cost (RMC) is proposed for coordinating regulation capacity in different areas to remove frequency deviations. Detailed regulating characteristics of the AGC strategy in the existing power systems are discussed. Based on the above analysis, a distributed coordination RMC controller is designed to meet the proposed multi‐area coordination rule using a partial primal‐dual sub‐gradient algorithm. In this proposed controller, the coordination signal containing RMC is exchanged with adjacent controllers through communication networks. The simulation results prove that the distributed coordination RMC strategy can economically coordinate the regulation capacity of an interconnected power system and satisfy the frequency control performance standard. [ABSTRACT FROM AUTHOR]