The cost of Energy Storage System (ESS) for frequency regulation is difficult to calculate due to battery’s degradation when an ESS is in grid-connected operation. To solve this problem, the influence mechanism of actual operating conditions on the life degradation of Li-ion battery energy storage is analyzed. A control strategy of Li-ion ESS participating in grid frequency regulation is constructed and a cost accounting model for frequency regulation considering the effect of battery life degradation is established. The estimated operating life and annual average cost of the Li-ion ESS under different dead bands and SOC set-points are calculated. The case studies show that the estimated operating life of the Li-ion ESS under the actual operating condition differs significantly from the nominal life provided by the manufacturer under the standard condition and the full discharge mode. This paper provides an accurate costing method for the ESS participating in grid frequency regulation to help the promotion of the ESS to participate in the ancillary service market.