Why do we short circuit a current transformer?

Two simple answers:
– by shorting the output, you also minimize the primary voltage drop across the CT.
– minimizing the current transformer voltage reduces also the flux, transformer VA and required core size.

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CT is connect in series with the load, when CT is shorted or connected to certain load, the impedance become negligible compared to circuit its connected, so voltage drop across CT will be negligible.
When CT gets open circuited, the impedance of CT become infinity, hence the voltage drop across CT primary will try to rise up to to the rated supply voltage, but in this process insulation fails.

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