Energy saving has attracted a lot of research interest in recent years, due to the increasing concerns about efficient energy utilization and environmental friendliness. Among the various energy saving technologies, both integration of renewable energy source (RES) and power quality conditioning can achieve the goals of reducing energy consumption of the users and reducing transmission losses in the power grid. In this thesis, a novel grid-connected inverter is developed to achieve the energy saving by simultaneous integration of RES and power quality conditioning with a low inverter voltage rating. The main advantage of this inverter lies in the low inverter voltage rating, which leads to reduce initial cost as well as running loss. In the conventional grid interfacing inverter systems, the inverters are integrated into the utility grid via inductive coupling branch. Its dc-link voltage needs to be higher than grid voltage in order to transfer the required power flow. The high dc-link voltage leads to high initial cost and running losses. On the other hand, in the area of reactive power and harmonic compensation, the capacitive coupling shunt-connected inverter has shown its advantage in the reducing inverter rating, which leads to low initial cost, reduced running loss as well as compact circuit size. However, the active power transfer ability of the capacitive coupling inverter has not been investigated. The power flow control characteristics of the capacitive coupling grid-connected inverter (CGCI) are studied and compared with the conventional inductive coupling grid-connected inverter (IGCI). Results indicate that the CGCI is able to achieve active power injection and reactive power compensation for inductive load when its dc-link voltage is lower than the grid voltage. Hence, this topology can provide a low-cost solution for implementing RES integration and power quality conditioning simultaneously. A step-by-step design procedure of the CGCI is developed based on its power flow control characteristics. The active power control is treated as the first priority in the design. With the proposed design method, the dc-link voltage of the CGCI can be less than 50% of the dc-link voltage of the IGCI. The control system of the CGCI consists of a digital phase locked loop (PLL), reference current detection module and dc-link PI regulator with anti-windup technique. Simulation results are provided to show that the CGCI can achieve simultaneous active and reactive power flow control as well as harmonic compensation under the designed dc-link voltage. With the control method developed in this thesis, power balance of the inverter and dc-link voltage regulation are achieved both in steady state and under dynamic variation of power flow. In order to enable the CGCI to operate within a wider power range, the adaptive dc-link voltage scheme and the reactive power adjustment are proposed and added to the control system of the CGCI. The adaptive dc-link voltage scheme adjusts the dc-link voltage of the CGCI in terms of the active power from the RES. It reduces operation losses when the active power to be transferred is low and increases the power transfer capability when the active power to be transferred is high. Reactive power adjustment of the CGCI is activated when the load reactive power exceeds the reactive power compensation range. It guarantees the active power to be transferred without adjusting the dc-link voltage, at the cost of the grid side power factor not reaching unity. Simulation verifications of the improved control are also provided. The dc-link voltage is transferred smoothly from one level to another in terms of the active power flow. Reactive power adjustment of the CGCI guarantees active power injection and avoids distortion of the grid current due to insufficient reactive power compensation range. A scaled-down prototype of the CGCI was built up. Experimental results indicate that the CGCI can achieve simultaneous active and reactive power flow control as well as harmonic compensation with its dc-link voltage lower than 50% of that required by the IGCI. The designed dc-link voltage is sufficient to support the required power flow control and harmonic compensation when load reactive power locates in the compensation range. It indicates that the CGCI is suitable for integrating the RES with a low inverter voltage rating when continuous reactive power compensation for *V - * * inductive load is required.