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This paper proposes controlled shunt capacitor called static Var compensation magnetic energy recovery switch (SVC MERS) for self-excited induction generator terminal voltage control. The proposed system consists of bi-directional switch, dc capacitor and inductor as a filter. Operation principle and characteristics are presented. A small scale experiment was conducted to verify the proposed system. The experiment results proved a good performance when being applied for self excited induction generator terminal voltage control in load and speed varying conditions. This system has the following advantages: (i) simple control implementation using voltage feedback control with PI controller (ii) low switching frequency with zero current turn on and zero voltage turn off resulting in low switching losses. Moreover, the experimental results show that capacity rating reduction of SVC MERS of about 54% can be achieved by installing fixed capacitor in parallel to the stator terminal.