We know that harmonics are generally due to the non linear loads connected at the load end. But whether harmonic distortion is increased or decreased by changing the X/R ratio of the source, feeder, transformer etc. And whether injecting power factor correction equipment into the grid will have an influence on harmonics.
Are harmonics produced only due to the non linear loads or also due to various other aspects in the transmission line?
Power factor correction, whether passive, active or dynamic, is a linear, reactive load, it doesn't produce harmonics but it certainly can be severely affected by them. Harmonic currents are drawn to capacitors, which act as a superb sink for these high frequency currents, causing overheating and at worse case, catastrophic failure.
If you have a harmonic rich network, you may be better using active harmonic filtering as this will remove the harmonic currents and provide power factor correction too.
If your network is soft (high impedance) this can also make harmonic distortion worse and also create harmonic voltages that can then affect other connected equipment and systems, worst case, outside your plant and into the public distribution network, affecting other consumers. The lower the X/R ratio, the higher (better) the system power factor.
A soft (weak) power network will have high impedance and a lower fault level, this will lead to high harmonic distortion and low harmonic current draw - a stiff system will have a low impedance, high fault level so the harmonic distortion will be low but harmonic current draw will be higher. Another significant hazard of poorly assessed and designed systems with both harmonics and PFC present, is harmonic resonance which again can cause catastrophic failure of equipment.
Harmonics are a product of modern, non-linear equipment. Linear equipment does not create harmonics.
It is important to note harmonics are not only a product of non linear loads, but can also be generated by such actions as magnetic saturation and energisation inrush, for example a large transformer being energized.
Harmonics will also make the power factor worse (total PF = displacement x distortion) which is where active filtering comes into its own.
To simplify the harmonic circuits, consider a network supply with a given voltage and impedance. When you connect a non linear load (such as a VFD or DC drive) it will draw non sinusoidal current and therefore create harmonic currents. When connected to a low impedance supply (stiff supply) the load will consume its rated harmonics (vendor should supply data sheet). If the supply impedance is higher (softer) the harmonic currents will be less. The harmonic currents will be supplied from the generation to the load via all the cables and transformers in between. However, a low impedance supply will have much less voltage distortion (voltage harmonics) than a high impedance supply. So the harmonic currents drawn by the load become harmonic voltages in the network but the magnitude of harmonic voltages is dependent on supply impedance. Harmonic currents cause extra heating in cables and transformers. You can check your local standards for transformers to see if there is built in.