This paper presents the simulation results of shunt active power filter (SAPF) implemented for compensation of current harmonics and voltage regulation at the terminals of an isolated synchronous generator (SG) with a diode rectifier load. The effects of non-linear load on SG operation and the harmonic compensation performance of SAPF are analyzed with simulation models developed in PSCAD package program. The applicability of SAPF for reducing the terminal voltage harmonic distortion of SG is verified by simulation results. The design and performance analysis of the switching ripple filter (SRF) for the system considered is given. The Fast Fourier Transform (FFT) and Instantaneous Reactive Power Theory (IRPT) methods are employed and tested for the reference current generation. Also, terminal voltage regulation of SG with SAPF is analyzed and discussed.