An improved continuous capacity modulation system for scroll-type compressors (10) is disclosed in which a valve body (136) of a solenoid valve assembly is secured to the inner wall of the hermetic shell (12) and the actuating coil is mounted on the outer surface thereof. The actuating coil includes a plunger/valve member which cooperates with passages provided in the valve body to selectively actuate the capacity modulation arrangement utilizing compressed fluid. The construction offers the advantage that all fluid pressure lines (160,162) are located within the hermetic shell and thus protected from potential damage, the solenoid coil may be easily changed/replaced to accommodate different available operating voltages and/or malfunction thereof and the system can be easily tested prior to final welding of the outer shell. The actuating coil is controlled by Pulse Width Modulation to reduce the load demand of the compressor during times when load shedding is required.