The peak-valley characteristic of electrical load brings high cost in power supply coming from the adjustment of generation to maintain the balance between production and demand. Distributed energy storage system (DESS) technology can deal with the challenge very well. However, the number of devices for DESS is much larger than central energy storage system (CESS), which brings challenges for solving the problem of location selection and capacity allocation with large scale. We formulate the charging/discharging model of DESS and economic analysis. Then, we propose a simulation optimization method to determine the locations to equip with DESSs and the storage capacity of each location. The greedy algorithm with Monte Carlo simulation is applied to solve the location and capacity optimization problem of DESS over a large scale. Compared with the global optimal genetic algorithm, the case study conducted on the load data of a district in Beijing validates the efficiency and superiority of our method.