Abstract: Taking a STATCOM (Static Compensator) project of a substation in Tangshan as example, the economic STATCOM capacity under negative sequence compensation is studied in this paper. The principle of negative sequence compensation by using of STATCOM is briefly introduced firstly, and the idea of negative sequence undercompensation is presented. In addition, proportional relationship between cost and capacity is considered, and quantitative analysis of the economy under negative sequence undercompensation is carried out, from which the linear relationship between cost and required unbalanced degree ε is obtained. In the end, the simulation is carried out by PSCAD/EMTDC tool based on background project. Results Show that the proposed method for determining installed capacity of STATCOM is rational and effective.