<p>With the increasing demand for electricity day by day, the grids are becoming more complex. This situation disrupts the reactive power balances in the grids, creating new threats to stability and energy quality. Conventional reactive power compensation solutions are unable to meet contemporary grid requirements due to their elevated prices and slow response times. The notion of smart grids provides more flexible and manageable frameworks to address these difficulties. This study employs an algorithm that delivers customized solutions through the coordinated management of grid components. The proposed Smart Reactive Power Compensation (SRPC) algorithm seeks to provide a cost-effective and dynamic solution by utilizing the reactive power capabilities of bioenergy and hydroelectric power plants, along with a spare XLPE cable that is already installed in the system but not actively used for load transfer, within the jurisdiction of TEİAŞ 14th Regional Directorate in Trabzon. When the <InlineEquation ID="IEq1"> <EquationSource Format="TEX">\(\tan \varphi \)</EquationSource> <EquationSource Format="MATHML"><math> <mrow> <mo>tan</mo> <mi>φ</mi> </mrow> </math></EquationSource> </InlineEquation> (reactive power/active power ratio) value continually monitored by the SRPC algorithm surpasses the thresholds established in the grid code, system components are dynamically engaged to reestablish equilibrium. This method provides a more cost-effective and adaptable integration than capacitor banks and FACTS devices, while maintaining consistent adherence to grid standards. The proposed methodology has been simulated with DIgSILENT Power Factory software and corroborated by testing with actual grid data.</p>