Abstract: The increasing capacity of user-side energy storage system can not only participate in capacity market transactions to provide reserve capacity for large-scale intermittent renewable energy grid connection, but also participate in ensuring power supply to bring additional benefits to the grid and users. Combining the two auxiliary services of capacity market and power supply, we propose an optimal allocation method of user-side energy storage system considering capacity market and power supply transaction mode. Firstly, based on the power supply behavior of the traditional grid-side emergency power supply vehicle, a mathematical model of the user-side energy storage system to realize the power supply replacement function is established, and a power supply transaction mode between the grid and users is proposed. Secondly, the power supply scenario of user-side energy storage is refined into full power supply, partial power supply and no power supply, and the power supply benefit of user-side energy storage is quantified. Then, the power supply transaction mode between the capacity market and the network load is taken into account, and a bi-level optimization model of power supply benefit and user-side energy storage system is established. The upper level takes the maximum net income of users in the whole life cycle as the ultimate goal, and the proportion of guaranteed power supply load, the rated capacity of user-side energy storage and its rated charging and discharging power is optimized; the lower level takes the maximum daily income of users as the objective to optimize the charging and discharging strategy of user-side energy storage system. Finally, the calculation results show that after taking into account the capacity market and the power supply transaction mode, the capacity of user-side energy storage system can be improved, the peak load of the grid can be reduced, and more benefits can be brought to the grid and users.