Micro Inverters are compact units that convert direct current (DC) to alternating current (AC) immediately at the solar module. As compared to solar PV installations that use string or central inverters, micro inverters deliver 5 to 10 percent greater energy harvest over the system lifetime by applying Maximum Power Point Tracking (MPPT) to each solar module to optimize energy harvest.  As a result, there is no dramatic reduction in system output when a solar module, or part of a module, has its output reduced by shading or build-up of surface debris. Additionally, as power conversion from DC to AC is done at each solar module, high voltage DC wiring is eliminated, making the solar system intrinsically safer, and specialized DC practices or equipment are not required for installation.

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More importantly, a micro-inverter attached to a single panel allows it to isolate and tune the output of that panel. A dual micro-inverter does this for two panels. For example, in the same 10-panel array used as an example above, with micro-inverters any panel that is under-performing has no effect on panels around it. In that case, the array as a whole produces as much as 5% more power than it would with a string inverter. When shadowing is factored in, if present, these gains can become considerable, with manufacturers generally claiming 5% better output at a minimum, and up to 25% better in some cases. Furthermore, as a single model can be used with a wide variety of panels, new panels can be added to an array at any time, and do not have to have the same rating as existing panels.

Micro-inverters produce grid-matching power directly at the back of the panel. Arrays of panels are connected in parallel to each other, and then to the grid. This has the major advantage that a single failing panel or inverter cannot take the entire string offline. Combined with the lower power and heat loads, and improved MTBF, some suggest that overall array reliability of a micro-inverter-based system is significantly greater than a string inverter-based one. This assertion is supported by longer warranties, typically 15 to 25 years, compared with 5 or 10 year warranties that are more typical for string inverters. Additionally, when faults occur, they are identifiable to a single point, as opposed to an entire string. This not only makes fault isolation easier, but unmasks minor problems that might not otherwise become visible – a single underperforming panel may not affect a long string's output enough to be noticed.

Micro-inverters have become common where array sizes are small and maximizing performance from every panel is a concern. In these cases, differential in price-per-watt is minimized due to the small number of panels, and has little effect on overall system cost. The improvement in energy harvest given a fixed size array can offset this difference in cost. For this reason, micro-inverters have been most successful in the residential market, where limited space for panels constrains array size, and shading from nearby trees or other objects is often an issue.