Owing to the rapid growth of Renewable Energy Sources, Microgrid finds greater significance in satisfying consumer need in today’s world. However, the increased number of Distributed Energy Resources might introduce power quality issues in a grid connected microgrid system due to the intermittent nature of such natural resources and power electronic converters associated with their conversion. So as to compensate such power quality issues, this paper proposes a Custom Power Device (CPD) namely Photovoltaic -Dynamic Voltage Restorer (PV-DVR), which uses a PV as a source for the Battery Energy Storage System (BESS). A PMSG driven PV Microgrid system with a MPPT controller for maximum power extraction from PV source and a hysteresis controller for effective grid synchronization and lesser harmonic distortion is taken for analysis. The dynamic performance of the grid connected microgrid system with DVR is analyzed for various loads and different power quality issues like voltage sag/swell, harmonics, interruption etc. Wavelet Transform based switching controller is used to detect the power quality event occurring and operate the PV-DVR accordingly.