Inverters convert direct current (DC) electricity produced by your panels into alternating current (AC) that can be used by your electric devices.
Photons from the sun hit electrons in solar panels. This interaction creates direct current. Your home and appliances use alternating current. So, an inverter is needed to ensure the DC electricity generated by your panels is turned into usable AC by your home.
There are two types of inverters: central inverters and micro-inverters. Central inverters receive all the energy generated by the panels and convert it to AC, while micro-inverters are connected to each panel, converting the electricity from DC to AC immediately.
Central inverters are usually located at ground level near the main electrical service panel, and a wire that connects your panels run from the roof to the inverter. Central inverters optimize energy conversion for the entire system. But, if one panel is shaded it can lower the performance of the rest of the system.
Micro-inverters work individually with each panel. If one panel is shaded it does not impact the production of the other panels. Micro-inverters are also optimized for the production of each panel and can increase power production by 5% to 25% compared to central inverters. They also make it easier to add more panels once a system has been installed. Most micro-inverters cannot accommodate high wattage panels (roughly greater than 285 watts). Micro-inverters may also complicate the process of connecting your system to a battery. Compared to central inverters, micro-inverters generally (although not always) come at a higher price point.