Distributed Generation (DG) has become an essential part of the smart grids due to the widespread integration of renewable energy sources. Reactive power compensation is still one of most important research topics in smart grids. DG units can be used for reactive power compensation purposes, therefore we can improve the voltage profile and minimize power losses in order to improve the power quality. In this paper two methods will be used to accomplish the mentioned tasks; the first technique depends on the reactive power demand change of the proposed network loads, whereas the second technique uses an algorithm to control DG units according to the measured voltage values in the feeders to generate the needed reactive power. Both methods were applied to different scenarios of DG unit positions and different reactive power values of loads. The chosen DG unit is made up of a Type-4 wind farm which could be used as a general unit where it is able to control reactive power generation in a wider range separately from active power. The simulation results show that using these two methods, the voltage profile could be improved, power losses reduced and the power factor increased according to the placement of DG units.