This article presents a photovoltaic (PV)–battery energy storage (BES) system functioning in both grid-tied and standalone modes while performing multifunctional operations, including reactive power compensation, power balancing, and power quality enhancement. The PV–BES system ensures uninterrupted power supply to the critical loads even during seamless transitions from grid-tied mode to islanded mode, and vice versa. The incremental conductance technique controls the boost converter and confirms maximum PV power extraction. The bidirectional converter connects BES to the dc bus. The dc bus voltage (Vdc) is regulated by a slime mold optimized proportional-integral controller to limit the dynamic state variation and improve stability. The voltage-source converter (VSC) is controlled by a minimum kernel-risk-sensitive mean p -power loss algorithm during the grid-synchronization mode. In contrast, the voltage control algorithm executes islanded control of VSC. The VSC control transition is achieved seamlessly without any significant disturbance at the point of common coupling. The hardware test results demonstrate that the present system remains stable during dynamic conditions and performs adequately as per the IEEE 519-2014 standard.