A power generation system is disclosed for supplying power to an electrical grid. The system comprises a synchronous machine and coupling means for coupling the synchronous machine to a prime mover. Control means are provided to control the system such that the system is selectively operable in two modes. In the first mode, the synchronous machine is coupled to the prime mover and acts as a synchronous generator to supply power to the grid. In the second mode the synchronous machine is decoupled from the prime mover and acts as a synchronous condenser. This can allow parameters of the grid, such as power factor and voltage, to be adjusted.