To solve the electricity and water consumption problems，a techno-economic research on wind-solar-diesel-storage isolated microgrid is made based on the engineering practice on Dongfushan Island.The paper focuses on the technology selection，optimal design and operation parameters optimization of the energy storage system in the Dongfushan stand-alone microgrid.By considering the technical，economic，security and maturity aspects，the option of improved valve-regulated lead-acid battery is chosen as the best solution for currently available technologies of energy storage.In the energy storage optimization configuration，multi-objective design is made with minimizing the operation time of diesel generator，maximizing the utilization of renewable energy，and maximizing the lifetime of the energy storage system as the optimization objectives.As for the selection of the energy storage systems operation parameters，by referring to the coordinated operation control strategy，the terminal voltage of battery banks is adopted as the standard to do the mode control，mode switch and storage system protection.The operation parameters are optimally selected to ensure that the microgrid operates orderly，efficiently and reliably.The actual operation analysis demonstrates the practicability and effectiveness of the research method.