The design of the capacitor bank to be placed with the squirrel cage induction generator, when operating with a direct connection to the distribution system, is performed from the value of the magnetization reactance of the machine. Based on the experimental procedures, the necessary reactive power is simulated according to the induction generator loading. Therefore, with the increase in generated active power, a larger portion of reactive is required. The simulation indicates the values of ideal capacitors. Thus, an analysis is made of which magnetization reactance factor is ideal for the capacitor bank design designated for the generator. The characteristic curve for capacitor bank sizing is related to the load torque loading depending on the active power generated. Thus, this work contributes to the analysis of the self-excitation curve of the three-phase induction generator that operates in parallel with the steady-state power distribution network. Obtaining the active power generated as a function of the absorbed reactive power required for induction generator magnetization can be found.INDEX TERMS Electric machines, distributed power generation, generators, power generation, power generation economics.