Abstract: The concept of penetration tolerance ratio of distributed generation system to distribution network was proposed for the first time, and it was used as an evaluation index to measure the absorptive capacity of distributed generation system in distribution network. In order to suppress the output fluctuation of distributed generation system, a charging and discharging control strategy of energy storage based on peak output reduction of distributed generation system was presented. The sensitivity relationship between the energy storage allocation ratio and the increase range of permeability tolerance ratio was analyzed, and an optimal allocation method of distributed energy storage considering permeability tolerance ratio was introduced. The simulation results showed that the distributed generation absorption level of distribution network could be improved by reasonable allocation of distributed energy storage capacity.