Capacitors ( or capacitor bank) are used to improve the operating efficiency of electric power systems and help transmission and distribution system voltage stability during disturbances and high load conditions.

• Capacitors are used to cancel out the lagging current effects from the motors and transformers.
• Capacitor can reduce the system losses and help provide voltage support.
• Another benefit of the capacitor is how they can reduce the total current flowing through a wire thus leaving capacity in the conductors for additional load.

Capacitor banks can be left online continuously to meet the steady state reactive power requirements of the system or they can be switched on or off to meet dynamic reactive requirements.

Reactive power compensation in a power system is of two types – series and shunt.

• Shunt compensation can be installed near the load, in a distribution substation, along the distribution feeder or in a transmission substation. Each application has different purpose.
• Shunt reactive compensation can be inductive or capacitive.
  • At load level, at the distribution substation and along the distribution feeder, compensation is usually capacitive.
  • In a transmission substation, both inductive snd capacitive reactive compensations are used.

Capacitor banks are installed on distribution line to reduce losses, improve voltage support, and provide additional load capacity on the distribution system. Reducing distribution system losses with capacitors is very effective since that also reduces transmission losses.

The closer a capacitor is installed to the actual inductive load itself, the more beneficial. For example, if capacitors are installed right at the motor terminals at an industrial load, losses are reduced in the lines feeding the motor, distribution losses would be reduced, transmission losses would be reduced and generation losses would also be reduced.