To address the pain points of slow response and high cost in peak shaving and frequency regulation of traditional power grids, this article explores the mechanism of electric vehicle energy storage in power grid regulation. First, summarize the parameter characteristics of mainstream technologies such as lithium-ion batteries and hydrogen fuel cells, and reveal their advantages of distributed and bidirectional charging and discharging. Subsequently, the peak shaving capacity of electric vehicle clusters of different scales was quantitatively analyzed-the total schedulable capacity of a 100000-vehicle cluster reached 2785.00MW·h, with an average daily valley filling of 1572.48MW·h, and the unit cost was as low as 0.76 yuan per kilowatt-hour. Moreover, innovative peak shaving models such as aggregators and vehicle-grid interaction were proposed. Finally, verify the frequency regulation performance of electric vehicle energy storage: The millisecond-level response speed is superior to that of traditional units. Combined with the battery management system, it can precisely control the frequency, and clarify its market access and pricing mechanism. Research shows that energy storage in electric vehicles can effectively smooth out load fluctuations and enhance the stability of the power grid, providing support for the optimization of the new power system.