Abstract: Taking a 66 kV dynamic reactive power compensation project at a substation in a provincial region as an example, a hybrid multilevel-based technical solution was designed and implemented, and the design and application effectiveness of this scheme were analyzed. Engineering validation shows that the scheme has significant advantages in improving grid stability, mitigating transient voltage instability, power factor fluctuations, and response lag. It can effectively improve transient voltage recovery time and power factor, while suppressing harmonic distortion, delivering notable economic benefits. Therefore, research on substation reactive power compensation technology can not only address issues such as poor transient grid stability and low power factor, but also provide effective technical support for scenarios involving renewable energy integration, making it highly significant for the optimized operation of power systems.