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This paper addresses the position error issue existing in sensorless IPM motor drives using the high frequency injection (HFI) method. A simple-to-design on-line compensation method is proposed based upon filter group delay theory, which substantially minimizes the error between the estimated position and the actual position caused by filters in a conventional HFI system. The method determines the position error compensation based upon a demodulation delay and a velocity or rotational frequency of the electrical machine. Experimental results with a 10-hp interior permanent magnet motor are presented showing improved sensorless performance using the proposed method.