This paper introduces a cascaded H-bridge multilevel converter (CHB-MC)-based StatCom system that is able to operate with extremely low dc capacitance values. The theoretical limit is calculated for the maximum capacitor voltage ripple, and hence minimum dc capacitance values that can be used in the converter. The proposed low-capacitance StatCom (LC-StatCom) is able to operate with large capacitor voltage ripples, which are very close to the calculated theoretical maximum voltage ripple. The maximum voltage stress on the semiconductors in the LC-StatCom is lower than in a conventional StatCom system. The variable cluster voltage magnitude in the LC-StatCom system drops well below the maximum grid voltage, which allows a fixed maximum voltage on the individual capacitors. It is demonstrated that the proposed LC-StatCom has an asymmetric V-I characteristic, which is especially suited for operation as a reactive power source within the capacitive region. A high-bandwidth control system is designed for the proposed StatCom to provide control of the capacitor voltages during highly dynamic transient events. The proposed LC-StatCom system is experimentally verified on a low-voltage seven-level CHB-MC prototype. The experimental results show successful operation of the system with ripples as high as 90% of the nominal dc voltage. The required energy storage for the LC-StatCom system shows significant reduction compared to a conventional StatCom design.