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This paper presents a space vector modulation (SVM) based switching strategy for a three-level neutral point clamped (NPC) converter that is adapted as a STATCOM. The main feature of the proposed SVM switching strategy is that it enables balancing voltages of the DC capacitors, with no requirement of additional controls or auxiliary devices. The proposed SVM strategy also improves the STATCOM AC-side harmonic spectrum and reduces voltage variations of the converter neutral point. Based on a dynamic model of the NPC-based STATCOM, two controllers to regulate the DC-side voltage and control the injected reactive power are corresponding controllers are evaluated based on digital time-domain simulation studies in the PSCAD/EMTDC environment. The studies demonstrate the capabilities of the proposed SVM technique to maintain voltage balance of the DC capacitors and control the STATCOM reactive power exchange for various operating conditions.