Let us consider an inverter based distributed generation unit.
There can be many pros and cons
1) Can be used in the micro-grid mode when the grid is out or due to an intentional Islanding.
2) Better voltage regulation depending on the controllers applied.
3) Better frequency regulation.
4) Provide grid support
5) Line loss reduction.
But, if we employ static generators at distribution levels, we have to know that the system stability now depends on the controllers employed. We also have to know that for the low voltage distribution lines, the line resistance is prominent hence the natural decoupling between P and Q i.e. the dependency of active power on frequency and reactive power on voltage is no longer valid. Hence if we have a power sharing controller present within the distributed generation units, the transient stability may be hampered if there are violent load changes and moreover, since most of the distributed gen units are inverter/ converter based units, they may also not be able to provide natural inertia during the transient period of the load change.
As far as reactive power support is concerned, inverters also have a capability region in which they can provide reactive power support but in case of micro-grids or distributed generation, voltage collapse is less likely to happen if the distance within the line is small and of course, voltage control is handled well within the inverter units using some sort of intelligent mechanism.
Power quality: As far as power quality is concerned, a lot of things can hamper the power quality. Suppose if there is an unbalanced fault in the system and there are no active filters present, the change in the voltage waveform can become detrimental to the inverter if the transformers are connected in Yg-Y fashion only.
If more rectifier based low power factor loads are connected, they will revert back the harmonic components present in the voltage to the inverter hence increasing the total harmonic distortion (THD) of the voltage/ current waveforms.
Though solutions for this problem has been published which states that D-STATCOM or the distribution side- static VAr compensator can handle harmonic voltages by continuous switching action of the inductive/ capacitive elements hence helping in the reduction of THD. And also provide adequate reactive power support. But practically, has this been implemented, I don't know!