Abstract--In PHIL simulations different time delays are introduced. Although it can be reduced, there is always some time delay. As a consequence, when the device under test is part of a low impedance power system such as: microgrids, marine or aero power systems, the simulation process becomes challenging due to the poor accuracy of the results achieved by the introduction of the time delay. Therefore, in order to accurately compensate for the inherent time delay introduced in Power Hardware in the Loop (PHIL) simulations, a method based on phase-shifting the reference voltage signal harmonic-byharmonic and phase-by-phase is proposed. In this manner the time delay compensation will not affect to the system topology and therefore the dynamic behaviour of the original system will stay as it originally was in terms of power angles and V-I phase relationships for all the harmonics processed. In this paper, an experiment where the reference voltage is altered with 5 th and 7 th harmonics shows that the accuracy of PHIL simulations after the application of this compensation method is greatly improved compared with traditional methods. As a result, low impedance power systems are now able to experience an accurate PHIL simulation.Index Terms--Harmonic compensation, interface algorithm, power hardware in the loop, PHIL, real time simulation, accuracy, stability, simulation time delay, low impedance power system.