An induction machine can also work as a generator without any external supply system. It's called an isolated induction generator. To provide the necessary excitation in the machine, a delta connected capacitor bank is connected across the terminals of it (see the figure).
The presence of residual magnetic flux is necessary to provide the initial excitation in the machine. If there is no residual magnetic flux, then, initially, the machine has to run as an induction motor to create residual magnetic flux.
At no load, the induction motor is run slightly above the synchronous speed with the help of a prime mover. Consequently, a small EMF is induced in the stator at a frequency proportional to the rotor speed.
The induced voltage appears across the delta connected 3-phase capacitor bank giving rise to a leading current drawn by the capacitor bank. This leading current is equivalent to the lagging current supplied back to the generator. A magnetic flux is set up by this current which assists the initial residual flux causing an increase in the net flux of the machine.
The increase in the net flux causes a net increase in the generated voltage. This increase in the induced voltage causes further increase in the terminal voltage. This voltage build-up by the induction generator continues up to a point where the magnetisation characteristic of the machine and the voltage-current (V-IC) characteristic of the capacitor bank intersect each other (see the characteristic figure as shown below).
At the point of intersection of the magnetisation characteristics of the machine and the voltage-current characteristics of the capacitor bank, the reactive power (kVAR) demanded by the generator is equal to the reactive power supplied by the capacitor bank.
The operating frequency of the induction generator depends upon the rotor speed and is affected by the load. The voltage of the induction generator is mainly governed by the capacitive reactance of the capacitor bank at the operating frequency.
The induction generator suffers from a very serious disadvantage that is, for a load of lagging power factor, the voltage of an induction generator collapses very rapidly.