Inverters are the heart of all photovoltaic and small wind power systems. Photovoltaic panels create Direct Current (DC) electricity from the sun's light. Inverters convert this DC electricity into Alternating Current (AC) electricity. AC electricity is what is used in homes and businesses for almost all purposes. (Some businesses use a small amount of DC power for manufacturing purposes.

There are two basic types of inverters, each with benefits and disadvantages. The two basic categories are Sine Wave and Modified Sine Wave.   Sine wave inverters produce output just like that available from the grid.  Therefore, all the appliances run on electricity run on sine wave inverter (provided power of inverter is enough).  Modified sine wave, as the name states, has a output which is different from the one from grid, but can power most of the household appliances.  But, appliances like LCD/Plasma TV, that require pure form of power input may not work on these inverters.  Modified sine wave inverters are cheaper then pure sine wave inverters.