-It is obvious that power quality is an important characteristic of today's distribution power systems as loadsbecome more sensitive on the other hand nonlinear loads are increasing in the electrical distribution system. Considering the distributed nature of harmonic loads, the need for distributed power quality improvement (PQI) is inevitable. From years ago, researchers have been working on various kinds of filters and devices to enhance the overall power quality of power system, but today the nature of distribution system has been changed and power electronic based DGs play an important role in distribution grids. In this paper, a thorough survey is done on power quality enhancement devices with emphasis on ancillary services of multi-functional DGs. A literature review is also done on microgrids concept, testbeds and related control methods. Although there were some applications of DGs for PQI improvement these applications were not defined multi-functional DGs. Various control methods are studied and categorized regarding different viewpoints in the literature. Finally, a couple of thorough comparisons are done between the available techniques considering the nature, capabilities, advantages and implementation costs.

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Multifunctional DGs and active power filters have become a mature technology in recent years, so in this paper, an optimized current control method for a multilevel converter is proposed to overcome harmonic current tracking inefficiency of previous control methods in online harmonic compensation applications in microgrids. This control method is applicable for grid-connected inverter-based multifunctional Distributed Generation (DG) converters. It could also be used in active power filter applications which need high-speed reference tracking ability. Having the advantages of current control methods like hysteresis band control, proportional-integral PI and Proportional + Resonant (PR) control methods, it overcomes disadvantages of these methods especially in harmonic reference tracking as it will be discussed in detail. The main advantages of this method are the simplicity of implementation, calculation delay compensation and its fast response to changes. The power electronic circuit, operating principles, two-horizon predicted switching states of MLI, experimental results and applications of this control method will be discussed in the paper. For studying the feasibility of the control method, a prototype of this converter is tested in a microgrid platform.