In this paper, a new configuration of E–STATCOM (STATCOM + energy storage) based on Modular Multilevel Converter (MMC) is proposed for PV dominated grids. An E– STATCOM is used to provide active power along with reactive power support and harmonic filtering. The MMC based configuration is capable to handle higher power compared to conventional two/three level inverter based topologydue to modularity, low losses, better harmonic profile, etc. The varying power produced by PV (under MPPT operation) can be compensated by E-STATCOM and hence constant power can be injected into the grid. This will help voltage and frequency stability of the grid and also allow maximum power capture from PV system. The integration of BESS at the DC link of MMC to form E-STATCOM and associated control are discussed in this paper. The effectiveness of such system is verified using PSCAD/EMTDC simulation.