A variable-frequency transformer is a doubly fed electric machine resembling a vertical shaft hydroelectric generator with a three-phase wound rotor, connected by slip rings to one external power circuit. The stator is connected to the other. With no applied torque, the shaft rotates due to the difference in frequency between the networks connected to the rotor and stator. A direct-current torque motor is mounted on the same shaft; changing the direction of torque applied to the shaft changes the direction of power flow.

The variable-frequency transformer behaves as a continuously adjustable phase-shifting transformer. It allows control of the power flow between two networks. Unlike power electronics solutions such as back-to-back HVDC, the variable frequency transformer does not demand harmonic filters and reactive power compensation. Limitations of the concept are the current-carrying capacity of the slip rings for the rotor winding.