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In the distributed power generation based on high-speed engines, the frequency of the voltage generated by the high-speed generator (in the order of thousands of Hz) is much higher than that of the grid (50 or 60 Hz). As a result, a static frequency changer is required for frequency matching as well as output power control. In this paper, a new method for the estimation of the reactive power demand of a naturally commutated cycloconverter (NCC) in a distributed power generation scheme based on high-speed engines has been proposed. As NCC is made up of phase-controlled thyristor converter blocks, it draws reactive power irrespective of the mode of operation (rectifier or inverter) and loading condition. The reactive power demand of the cycloconverter varies with the power delivered to the grid. It is important to compensate dynamically for the reactive power drawn by the NCC using a local static Var compensator. In this paper, the reactive power demand of an NCC has been estimated for a range of output power levels, using the proposed method. The analytical results have been verified using the simulation results obtained from PSCAD/EMTDC simulation package.