Existing standards impose limits on the allowable feeder voltage variation in a distributed generation environment. These stipulations must be respected by the distributed power generators (suppliers), which put a cap on the penetration level. A possible solution is to provide reactive power support to improve the voltage profile. This paper proposes a novel scheme, where an auxiliary circuit (comprising an inverter and reactive power bank, RPB), in conjunction with a PV-grid system, increases the system's reactive power compensation capacity up to 300% compared to the original or dedicated VAR capacity of the main PV inverter. In spite of using only the conventional discrete form of capacitor/inductor bank, the entire VAR range can be controlled. This enables the local Photovoltaic Distributed Generation System (PV-DGS) to provide the necessary reactive power support for the mitigation of large voltage variation on the feeder because of reverse power flow, intermittent solar radiation and load variation. This, in turn, supports increased PV penetration into the power system. As an extension of the proposed scheme, any existing conventional reactive power banks may be retrofitted with a given PV grid system to realize the proposed functionality. Detailed modeling, analysis and control design are included along with experimental verification. © 2014 IEEE.