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Capacitors are used to provide reactive power compensation in distribution networks and are widely used to reduce power loss, improve voltage profile and increase system capacity. The benefits of reactive power compensation depend greatly on the placement and size of the added capacitors. Presently, the capacitor placement problem is widely solved by using evolutionary programming methods. In this paper, an improved harmony search (IHS) algorithm is applied to solve the optimal capacitor placement problem. The performance of the proposed IHS algorithm is validated on the 9-bus distribution system. The obtained capacitor placement results using the IHS algorithm are compared with the particle swarm optimization and the traditional harmony search algorithm.