Introduction:
A shunt reactor is a type of electrical device that is used in power systems to regulate voltage and control reactive power. It is connected in parallel with the power system and its main function is to absorb reactive power and maintain the voltage levels within acceptable limits. In this question, we need to determine the effect of a shunt reactor on the power transfer in a power system.

Explanation:
The correct answer to this question is option 'C', which states that a shunt reactor does not affect power transfer. Let's understand why this is the correct answer:

1. Power Transfer:
Power transfer in a power system is determined by the active power (P) and reactive power (Q) consumed or generated by the load. The active power is responsible for doing useful work, while the reactive power is required for maintaining the voltage levels and supporting the operation of electrical equipment.

2. Shunt Reactor:
A shunt reactor is designed to absorb reactive power from the power system. It consists of a coil connected in parallel with the load, and it is typically used to compensate for capacitive reactive power in the system. By absorbing reactive power, the shunt reactor helps to maintain the voltage levels within acceptable limits.

3. Effect on Power Transfer:
The shunt reactor does not directly affect the active power transfer in the power system. It only absorbs reactive power, which does not contribute to the active power transfer. Therefore, the power transfer in the system remains unaffected by the presence of a shunt reactor.

4. Steady State Power Transfer Limit:
The steady state power transfer limit is the maximum amount of power that can be transferred through a power system without causing voltage instability or exceeding equipment limits. It is determined by various factors such as the impedance of the transmission lines, transformer ratings, and the reactive power support available in the system.

5. Reactive Power Compensation:
By absorbing reactive power, the shunt reactor helps to compensate for any excess capacitive reactive power in the system. This improves the voltage profile and reduces voltage fluctuations. However, it does not directly affect the steady state power transfer limit.

Conclusion:
In conclusion, a shunt reactor does not affect power transfer in a power system. It only absorbs reactive power and helps to maintain voltage levels within acceptable limits. The steady state power transfer limit is determined by other factors such as the impedance of the transmission lines and transformer ratings.