To promote the large scale commercial application of battery energy storage system, the energy storage is considered from both planning and operation under two part tariff scenario. An optimized configuration and assessment strategy with whole life cycle considering demand management is proposed. Firstly,the annual revenue model of energy storage participating in demand management arbitrage is constructed, including energy price and basic electricity demand charge. Meanwhile, the power randomness of energy storage is restrained. Secondly, the whole life cycle cost of energy storage is evaluated, and the impact of battery capacity degradation is considered to quantify its loss cost function.Then, integrated with the historical load, time of use electricity price, state of charge, charge discharge power and other constraints of the energy storage system, the minimum objective function is utilized to optimize the output power of energy storage. Finally, the economic feasibility of the model is verified through practical examples, which provides basis for the investment decision and operation guidance of user side energy storage.