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In order to reduce inverter capacity and enhance system reliability, a novel series hybrid active power filter (APF) based on controllable harmonic impedance is proposed in this study. As the pulse-width-modulated inverter works as a controlled harmonic current source, the series transformer (ST) can exhibit the controllable impedance to harmonic current, which makes the impedance of primary winding of series transformer very high for all frequencies except for the fundamental, thus forcing all harmonic current components through the passive filters and therefore preventing harmonic currents from entering the main power system. Adopting the small self-inductance ST, the inverter and secondary winding of the ST need not endure the fundamental current but only endure the injected harmonic currents, and the LC fundamental tuned bypass can be omitted; so the cost of the proposed APF will be very low. The validity of the proposed APF is verified by the simulation and experimental results.