This is the right approach, but as you said it does come with an algebraic loop. You can resolve this loop by adding in a Transfer Fcn block to act as a low-pass filter. In fact, several Simscape Power Systems blocks (e.g. PV Array) already do this under the hood.
The transfer function will typically take the form 1/(Ns+1) where N is associated with the time constant of the filter. You want to pick this value to be small enough that it doesn't filter out your system dynamics, but large enough that it doesn't slow down your simulation with high-frequency components.
Sebastian
