Infrastructure of a distribution systems is facing major challenges with deregulated power system. Reactive power compensation can reduce energy losses in system, improve voltage profile and release feeder capacity. Installation of capacitors in distribution network is ensuring more efficient systems, but also provides economic benefit to utility and users. Vital task for capacitor implementation is to determine the best locations and size of capacitors. Hence, capacitor placement has an important role in distribution system planning. In this paper, using the professional software tool DigSILENT Power Factory, optimal capacitor placement is analysed in real low voltage distribution network. Results and analysis show that by optimal capacitor placement annual losses and adequate size for installed capacitors can be calculated. The capacitor placement problem consists of objective function which is composed of power losses and capacitor installation costs subject to bus voltage constraints. Optimization placement calculation is compared to installation of four capacitors in given case study distribution grid. Simulation results show that with appropriate software techniques optimal capacitor placement can be achieved in distribution grid.