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The study of sensorless control for permanent magnet synchronous machines (PMSM) has progressed rapidly over the past decade. This is contributed to the increased reliability and reduced cost obtained by removal of the traditional mechanical feedback devices that were needed to accurately report rotor position in applications requiring a Field Oriented Control (FOC) scheme. In these type applications, accurate electrical rotor position is required in order to ensure system stability. Much work has been performed on sensorless systems for motoring applications where speed and torque are directly controlled. However, sensorless control approaches for active-rectification of a synchronous generator for dc bus regulation are not as widely discussed. This paper presents an innovative solution for sensorless electrical angle estimation for a surface permanent magnet (SPM) generator utilizing a Sliding-Mode Observer (SMO) approach with Adaptive Gains. Analytical analysis is first performed in order to validate the SMO as a candidate for sensorless generator control. Once verified, the algorithm performance is demonstrated using MATLAB® Simulink. The data obtained in simulation is then validated using a generator and generator controller in the Systems Integration Lab (SIL). Finally, the experimental data is compared to the analytical and simulated results to fully validate the proposed algorithm.