A new, utility-interactive hybrid distributed generation scheme, with reactive power compensation feature, is presented. The basic objective is to realize a reliable power supply for a remotely located critical load. Fuel cell (FC) stack and photovoltaic (PV) array are considered as energy sources. These sources can be operated independently or in conjunction as per the requirement. The control logic employed ensures maximum utilization of the PV array, resulting in optimum operational costs. Only one inverter is used to connect both the FC stack and the PV array to the utility. Apart from feeding active power into the grid, the system can also provide reactive power compensation. Active and reactive power can be independently controlled by controlling the inverter's power angle and modulation index, respectively. This provides more flexibility in control and operation. All the details of this work, including power and control circuits, MATLAB simulation results, and experimental results, are presented. Index Terms-Compensation, fuel cells (FCs), photovoltaic (PV) cells, reactive power. I. INTRODUCTION T HE demand for energy is increasing rapidly with increasing population and industrialization. Initially, centralized power generation was promoted because transportation of fuels is more difficult than transmition of the generated power. However, for relatively small loads, which are quite far from these stations, this approach suffers from the following drawbacks: 1) distribution lines incur significant losses; 2) poor voltage regulation and low power quality; 3) low reliability. Further, centralized power stations run on fossil fuels, which are not renewable. Therefore, the use of nonconventional energy sources, which are both renewable and eco-friendly, is desirable. The above-mentioned drawbacks and constraints can be handled by generating the power "locally" from sources like photovoltaic (PV) arrays, fuel cell (FC) stacks, wind energy, small hydro, etc. This concept of generating the power locally is known as distributed generation (DG) [1] and its advantages include low distribution losses, better power quality, and high reliability [2]. A DG system works particularly well if the energy sources are small in capacity and distinct in nature. When, different types of energy sources are integrated into a DG system, it is called a hybrid distributed generation system (HDGS). In a DG system,