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This paper presents a novel dynamic model in the stationary reference frame for a diode bridge rectifier with a dc-link filter directly connected to an induction generator (IG). Moreover, a hybrid excitation system consisting of a capacitor bank with a small-scale active power filter (APF) regulates the stand-alone IG systems output voltages by controlling its reactive current component and cancels the harmonic currents generated by a nonlinear diode rectifier load. A deadbeat current control strategy for the small-scale APF is used to enhance the operating performances of the stand-alone IG. This power generating system can be used for small hydro and wind energy applications, where its generated electrical power is supplied to different load types, i.e., dc and ac loads. The measurement results validate the proposed power generating system with the deadbeat current controller as a good application for the IG to reduce the total system cost and the required number of sensors.