According to the theory of instantaneous reactive power, the active and reactive currents of inverter can be regulated by changing the amplitude and the phase of the output voltage of the inverter. Based on this theory, the active power output and the reactive power compensation (RPC) of the system are realized simultaneously at daylight. When the insolation is weak or the PV modules are inoperative at night, the RPC feature of PV system can still be used to improve the utilization factor of the system. The MATLAB simulation results validate the feasibility of the method. (c) 2004 Elsevier Ltd. All rights reserved.