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A variable-speed engine generator set for an isolated power system is investigated due to reduced fuel consumption and less emission. However, because of the sluggish dynamic behavior of the internal combustion engine, the power quality would be degraded during the sudden load power surge, where the power required by the load is not available by the engine because of the reduced engine speed. An isolated power system based on a variable-speed engine with a supercapacitor bank can improve the dynamic characteristics under such a sudden load change, and power quality, fuel consumption, and emission of pollutants can be improved remarkably. Furthermore, it is verified by the computer simulation and experimental results that the three-phase four-leg inverter is compatible to the isolated power system with an unbalanced load. In this paper, the feasibility of the system has been verified based on a 26-kW commercial diesel engine system.