The electrical utilities are very much concerned about the power quality due to the presence of nonlinear loads in their power distribution systems. The non-linear residential loads cause harmonics in the residential distribution systems. To mitigate the harmonics, active or passive filters are normally used. Past decade has seen a rise in the installation of DGs in residential areas. Especially renewable energy based DG’s such as Photovoltaic (PV). In this thesis we focus on an existing model of a distribution network present in Netherlands (Vernormeer 4), and discuss the impact of harmonics on the system and how we can mitigate these harmonics by using active filtering methods. The passive filters utilize the passive components such as Inductors, resistors and capacitors and the active power filters utilize the power electronic switches for the harmonic compensation. The active filters are advantageous than the passive filters because it can eliminate focused or a wide range of harmonics in the system where as passive filters compensate specific order harmonics. The example for the active filter is the inverter, in which the controlled switching of the inverter compensates the harmonics in the specified system. Traditional methods of control on the inverter are still a cushion most of the manufacturers fall back on, but these types of inverters have major issues. They utilize the voltage supply for the reference wave generation and synchronization which in itself might be polluted and hence polluting the injected current into the grid. We implement a dq-control methodology on the inverter, which has been a focal point for researchers nowadays on inverter control. In this thesis, we jump into the dq-control architecture and see how it performs on the grid-connected mode and investigate the harmonic problems that are existent in almost every distribution network. We also try providing a framework for future research on mitigation and further analysis on several power quality problems.