Modular Multilevel Converters are emerging and widely used in HVDC applications. However, the submodule capacitors are still large and the energy balancing under unbalanced conditions is a challenge. In this paper, an analytical model focusing on the energy stored in the capacitors and voltage variations is utilized in order to achieve better performance. By injecting a second order harmonic component into the circulating current, the energy variation and consequently the capacitor voltage ripple is reduced allowing for a capacitor size reduction. At the same time, an arm energy balancing controller has been proposed which uses the first harmonic of the circulating current in order to keep the energy balance of the leg under internal unbalanced conditions.