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In this paper the three-phase grid connected inverter has been investigated. The inverter's control strategy is based on the adaptive hysteresis current controller. Inverter connects the DG (distributed generation) source to the grid. The main advantages of this method are constant switching frequency, better current control, easy filter design and less THD (total harmonic distortion). Since a constant and ripple free dc bus voltage is not ensured at the output of alternate energy sources, the main aim of the proposed algorithm is to make the output of the inverter immune to the fluctuations in the dc input voltage This inverter can be used to connect the medium and small-scale wind turbines and solar cells to the grid and compensate local load reactive power. Reactive power compensating improves SUF (system usage factor) from nearly 20% (in photovoltaic systems) to 100%. The simulation results confirm that switching frequency is constant and THD of injected current is low.