Power electronic energy conversion systems for applications such as PHEV typically require single phase AC-DC bi-directional energy transfer with galvanic isolation. A common topology is an AC-DC single phase voltage source inverter, followed by a galvanically isolated high frequency DC-DC bi-directional dual active bridge. A major challenge for this topology is to minimize the intermediate DC bus capacitance, preferably down to a value where electrolytic capacitors are not required. For a single phase system, this is particularly challenging because of the need to match the oscillating power flow from the AC side, to a steady state power flow on the DC side of the system. This paper identifies the fundamental limiting issues for the DC bus capacitance in this application, and presents an optimized converter control strategy that minimizes its value. The analysis is confirmed by matching simulation and experimental results