Abstract: With the vigorous development of new energy vehicles, a large number of batteries will be retired to participate in the new power system in the future. In order to maximize the economic benefits of the cascade utilization of retired batteries, it is necessary to optimize the capacity configuration of the retired battery energy storage system. This article first proposes a retired battery life assessment method based on the rain flow counting method and the equivalent cycle life method, Then, based on the application scenario of peak shaving and valley filling, a capacity configuration method for the full life cycle energy storage system of retired batteries is proposed, which comprehensively considers factors such as low storage and high discharge benefits, carbon emission reduction benefits, delayed grid upgrade benefits, initial investment costs, and operation and maintenance costs, and uses particle swarm optimization algorithm to solve the problem. Finally, based on the results of the example, it can be concluded that this capacity configuration method can not only improve the economic benefits of retired battery energy storage systems, but also extend the lifespan of retired battery energy storage systems.