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MPPT is widely used in photovoltaic (PV) systems. Among all MPPT schemes, ESC is attractive because it utilizes inverter decoupling ripple and reduces decoupling capacitor size. In this paper, an improved variable step-size ESC algorithm is proposed, which not only has the merits of conventional ESC but also automatically adjusts step-size to track PV module maximum power point (MPP). Compared to conventional ESC, the proposed algorithm can greatly improve response speed in fast irradiance transient conditions and accuracy at steady state simultaneously. Moreover, it can reduce decoupling capacitor size further more. This paper provides the theoretical analysis and design principle of proposed algorithm. Simulation results verify its feasibility.