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In the distributed generation system, DC-DC converters and inverters are used between different sources and the loads. These inverter operation influences the power quality, stability and reliability of a given electrical network. The improvement in the performance can be achieved by using `Multilevel Inverters' in place of conventional two level inverters. In this paper, 3-level and 5-level inverters topologies are compared under different modulation strategies with two-level inverters. When inverters are connected across the DC link to convert suitable energy available from different sources in to the grid, it is essential to utilize the DC bus to its maximum. The performance indices like THD, DC bus utilization and efficiency of an inverter solely depends on its modulation strategies. This paper also investigates the different carrier based modulation techniques used for the multilevel inverters. The inverter losses can be minimized to make more efficient energy conversion by proper implementation of these control strategies.