The power quality of interconnected grid is highly affected by the non linear loads and the interconnected renewable energy sources like wind and solar systems. The drastic changes in their input effectively change the grid parameters. This paper provides a novel method in which compensator continuously monitors the line parameters like voltage, currents, harmonics and reactive power to maintain the desired values at common connecting line (CCL). This paper utilizes the capabilities of hybrid Fuzzy and ZN PID Controlling of Dynamic Active Power Filter (DAPF) along with the Energy storage at dc link. The proposed model simulated in MATLAB/SIMULINK and at the grid common connecting line, the power factor and Total Harmonic Distortion values are much improved. © 2015 IEEE.