In order to better solve power quality problems caused by spot welder load such as three-phase unbalanced load and low system power factor, a reactive power compensation method based on static synchronous compensator (DSTATCOM) is proposed. The structure of main circuit of DSTATCOM is provided firstly, and then an improved current detection method based on the instantaneous power theory is presented, which can detect harmonic and reactive current. Subsequently, the principle of balancing unbalanced three phase load using DSTATCOM is analyzed. According to the actual working conditions of spot welding, simulation is done, which shows the proposed method can balance three-phase currents, improve system power factor and reduce voltage sags, and also proves that DSTATCOM has good dynamic and static compensation performance.