Traditional wind turbines are commonly equipped with induction generators because they are inexpensive, rugged, and require very little maintenance. Unfortunately, induction generators require reactive power from the grid to operate; capacitor compensation is often used. Because the level of required reactive power varies with the output power; the capacitor compensation must be adjusted as the output power varies. The interactions among the wind turbine, the power network, and the capacitor compensation are important aspects of wind generation that may result in self-excitation and higher harmonic content in the output current. This paper examines the factors that control these phenomena and gives some guidelines on how they can be controlled or eliminated.