An optimal allocation method is proposed to solve the capacity allocation problem of energy storage batteries participated in power grid frequency regulation. Considering the various costs of energy storage and the benefits that can be obtained, the capacity retention rate model of energy storage is established. The influence of different depth of discharge on the cycle life of energy storage is analyzed and calculated using numerical analysis method. Based on the area control error signal, the power output sequence of the energy storage is obtained taking the energy storage operation characteristics and grid frequency regulation demand as constraints, so as to optimize the allocation of the power capacity and energy capacity of energy storage. Finally, the actual grid data are used to simulate and verify the technical and economic characteristics of energy storage allocation under different depth of discharge. The optimal depth of discharge for the overall economy is given. The results show that the proposed allocation method can flexibly coordinate the economy and technology of energy storage allocation scheme.