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A modular power electronic converter, with a cascaded H-bridge multilevel inverter, has been proposed as the grid interface for a large direct-drive wind turbine generator. The present study is to investigate the potential and requirement of fault-tolerant operation in such a system. As each module is connected to isolated generator coils, tolerance to a module or coil fault is possible if the affected module can be bypassed, whereas the control of the healthy modules can be adjusted accordingly. A boost rectifier scheme on the machine side of the power conversion stage has been developed for this purpose, featuring control of the coil current without measuring the electromotive force. A coordinated dc-link voltage controller has been developed, which can rapidly raise the dc-link voltage of the remaining modules to compensate for the loss of a module while ignoring the ripple in the dc link due to low-frequency inverter switching. The ability of the resultant system to tolerate module faults has been demonstrated on a small-scale laboratory prototype.