Power system expansion planning is supported by using distributed generation (DG) instead of installing new main grid generators. The portability and autonomous operation of the DG make it capable of integrating into the distribution system. Recent developments in power electronics devices have enabled electric vehicles and other DC loads to be added to the already existing loads. This paper uses the DG to supply the Distributed Static Compensator (DSTATCOM) that rectifies the power quality issues in the distributed system with non-linear load (Electric vehicles). A common DC source is generated using both wind and Photovoltaic (PV) generators. The grid side converter which is the voltage source inverter (VSI) acts as the DSTATCOM and solves the power quality issues and reduces the harmonics inherent in the system with power electronic devices. Power electronics devices meant for home loads mainly electric vehicles, mobile phones, and laptops introduces non-linearity to the distribution system. This load creates power quality issues like an increase in THD and a reduction in power factor. To improve this power quality, there is a need for an active power quality improvement device like (D-STATCOM). Power generated from both the PV and wind energy system is combined at the DC link of the grid side VSI which acts as the D-STATCOM. Direct axis /Quadrature Axis method (DQ method) is used to control the real and reactive components of the power. Both Proportional Integral (PI) and Particle Swarm Optimization based PI controller parameter estimation is developed and results are compared for power quality performance. PSO based parameter estimation of PI controller is found to be performing better than the PI controller in improving the power quality