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This paper proposes a new topology of Z-source based cascaded multilevel inverter. In this topology the output voltage is not limited to DC voltage source similar to traditional cascade multilevel inverter and can be increased with Z network shoot-through state control. Besides, it is more reliable against short circuit. Performance of suggested topology in the closed-loop control scheme is described in the Dynamic Voltage Restorer (DVR) structure. Compensation capability of the proposed DVR increases. The operating principle, switching algorithm and characteristics of proposed topology are described in this paper. The performance of suggested inverter and switching algorithm are validated with simulation results using MATLAB/SIMULINK software.