Although the number of PV installations is rapidly growing, the effective utilization of PV inverters remains low. On average, most of today's grid-tie PV inverters operate an average of 6-8 hours per day. In order to increase the utilization of grid-tie PV inverters, they can be operated in reactive power compensation mode when PV power is unavailable. While injecting reactive power into the grid can be easily realized by applying the appropriate phase shift between current reference and grid voltage, the task gets more complex when PV power is not available since the inverter needs to draw power from the grid, regulate the DC bus, and inject the desired level of reactive power. This paper will provide a detailed analysis of PV inverters' operation in VAR compensation mode when active power is not available. A new control scheme is proposed that enables inverter to absorb little active power from grid, regulate its DC bus voltage within limits, and inject the desired level of reactive power. Simulation and experimental results are provided to validate the analysis. I.