Abstract This article presents a detailed method for reactive power valuation exclusively from the generator‐side point of view. This study is performed on a 1.5 MVA doubly‐fed induction generator and two main generator‐side parameters are introduced as the effective variables. These variables include power loss and active power capacity. In this article, in constant apparent power, the produced/consumed reactive power of the generator in exchange with the power grid is studied in detail and the operational characteristics of the generator including active/reactive power, power factor, and efficiency are reported. Using these functional characteristics, the power loss increment factor and the active power capacity reduction factor are proposed. Finally, the reactive power valuation factor that is the main output of this article is presented and the results are compared with the current reactive power pricing method in Iran. The results show that the proposed method can be useful for a more accurate analysis of reactive power valuation problem from the generator point of view.