In this paper, we aim to address the limited capacity of compensation devices by enhancing their utilization rate by applying the currents’ physical component (CPC) theory for reactive power optimization in three-phase four-wire systems. When reactive currents cannot be fully compensated for, we propose using CPC theory to generate reference currents for the compensation devices. Weight coefficients associated with different reactive current components are introduced, enabling flexible combinations of these independent current components. The maximum output amplitude of the three-phase current from the compensation device serves as a constraint condition, allowing for the calculation of reference currents under various compensation targets. Additionally, a reactive current optimization compensation scheme focusing on loss reduction is selected. The simulated annealing–particle swarm optimization (SA-PSO) hybrid algorithm is employed to solve the optimization mathematical model. The discussed calculations, current waveforms, and voltage waveforms are generated using the constructed mathematical model and then used for a theoretical explanation. The simulation verifies the feasibility of the proposed method.
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