Abstract: Performance of lithium iron phosphate batteries was assessed, which were chosen for energy storage in the microgrid system in severely cold and high elevation regions. The influence of ambient temperature on those important parameters such as charge-discharge performance, cycle life, system capacity and safety performance was analyzed. The results showed that lithium iron phosphate batteries had long cycle life with excellent tolerability, especially at high charge-discharge rate. Meanwhile, such type of batteries also exhibited high durability and safety index. On the other hand, ambient temperatures had significant effect on the battery performance. For instance, the discharge capacity declined sharply at low temperature (–30 °C), with only 89.89% relative capacity (compared to 25 °C). Also the battery cycle life was shortened at high charge-discharge rate. Moreover, based on the climate conditions in the severely cold and high elevation regions, the lithium battery energy storage system was optimized respectively, and the reliability of system was experimentally verified in harsh environments. From the research results certain technical support can be provided for the application of lithium iron phosphate batteries in the severely cold and high elevation regions.