I don't think it's doing anything. The lead at the bottom is broken off! You should probably remove it. That bare lead coming off the positive worries me. Disconnect the batteries first.
It was probably put there to reduce interference. I don't see the usual type of alternator capacitor there.
Most alternators don't put out any current until they're up in RPM a bit so that is why you might not see it charging until your open the throttle a bit.
The blue capacitor is shot. It was used for radio noise interference wine. If the alt. is coming up slow it needs to be rebuilt. It is lacking exciter voltage. Once the unit is up to speed the alt. will build exciter voltage on its own. It could also just be dirty contacts. Not that it looks dirty or anything. If nothing else remove it and clean it good and try it. If it was me, I would just take it to a rebuild shop and be done with it.
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