Surely that is explained in the organisation's Standard Operating Procedure documents?
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Once the total load on isolated
generator can be subjected to changes with time a capacitor are connected for
pf perfection might suddenly causes the total load to become capacitive. Sometimes
the total components have an unsafe effect on the capacitors bank. So, it is highly
suggested to control this values of the harmonic.
Every generator has limited capability to operate under leading power factor load which may be governed by its END ZONE HEATING limits and / or margin on stability. (load angle approaches 90 degree).
If you do not turn off the capacitor bank, the resultant power factor as seen by the generator will depend on amount of load and its power factor.
I'm thinking that what is happening is due to the voltage regulator cross current compensation.
When a generator is paralleled onto a bus, if the generator voltage is not set equal to the bus voltage, reactive current will flow between the generator and the bus. This reactive current is sensed by the cross current compensation circuit in the voltage regulator which corrects the voltage setting.
The reactive current caused by the capacitor bank would give the same indication to the cross current compensation circuit as an incorrect voltage setting and cause an improper voltage adjustment.
If the Capacitor BANK is on Line, (while starting the Generator, there will be NO-LOAD on the Generator) the capacitor will be working as load and it will result in HIGHER TERMINAL VOLTAGE and the Power Factor will be LEADING P.F. Pl. refer a Standard Electrical Technology Book for the related VECTOR DIAGRAM.
The higher terminal voltage will cause damage to the equipement. Hence the capacitor bank should not be switched on before loading the Generator, and as when the P.F is to be improved, the capacitor bank should come on-line.
In some older switchboards there
used to be a Hand-Off-Auto switch for power factor correction, problems could
arise (did) in one case that I investigated of the switch left on hand. Was
concluded this damaged the generator diodes when the stand-by generator
started.