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Transformer VS output filter in VFD and motor connection

You might want to use an isolation transformer between the variable frequency drive and the motor if the VFD is long distance from the motor.
But you should caution in applying an isolation transformer between the output of a drive and a motor. Most standard transformers are not designed to have a PWM voltage applied to the primary. Also, the transformer impedance is going to be in the 5% to 7% range which could introduce enough voltage drop that the motor would not be able to achieve its rated output HP.

Applying an isolation transformer or line reactor typically adds impedance, but adds little real motor protection.
An output filter typically adds a resistive/capacitive circuit that mitigates the harmful "spikes", protecting both the motor and wiring especially as the distance between the motor and VFD drive increases.

There are transformers available that are designed to work with the variable frequency / variable voltage of an inverter, but they can be pricey. The right filter can protect most motor windings, even at long lead lengths. In either configuration there will be additional losses and care needs to be taken to ensure adequate voltage at the motor terminals.
Much of the shaft performance and related efficiency of an induction motor is dependent on the rotor bar slot configuration and slot material (such as the aluminum or copper mentioned earlier). These slot designs provide better shaft performance and reduced heating on inverter waveform resulting in better efficiency overall.
A note of caution here is the consideration of across the line ('ATL') starting of an inverter-optimized rotor design. This type of rotor behaves more like a NEMA design ‘A’ with higher inrush during high-slip (‘ATL’ starting) situations. Often a higher overload protection setting is required, and the motor may struggle to start the connected load in some instances.

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