Why is reactive power compensation needed in a power system?

Almost all loads require reactive power for satisfying their magnetic field demands (for ex. motors). This reactive power is supplied to the loads by the electrical source. Also the amount of reactive power extracted by the load depends on the load condition.
If too much reactive power is consumed by the load from the source, then the system may become unstable due to excessive current being drawn by the load. This is harmful (due to insulation failure) and uneconomic (due to imposition of penalty by the electric supply authority).

Some of the reasons in brief, which makes reactive power so important.
1. Voltage Control
2. To Satisfy Reactive Power Demand
3. To Reduce Electrical Blackouts
4. To Produce Magnetic Flux

Why Do We Need Reactive Power?

1. Reactive power (VARS) is required to maintain the voltage to deliver active power (watts) through transmission lines.
2. Reactive power (VARS) is required to maintain the voltage to deliver active power (watts) through transmission lines.
3. Motor loads and other loads require reactive power to convert the flow of electrons into useful work.