The load incident on the distribution system is mostly inductive, needed large reactive power. The best technique is to compensate the reactive power at the load end itself but it is hard to implement in practice. Thus, giving compensation on the distribution system is necessary. So wherever the power factor is low, reactive compensation might be given on the distribution transformers.
The shunt capacitor supplies constant reactive power at its location, independent of the load. Fixed or automatic switched type capacitors of adequate rating are to be provided on the LT bus of the distribution transformers. Within the switched capacitor system, the capacitors are switched on and off along with the load to prevent over-voltage during low load operation.