Aiming at the problems of the negative sequence governance and regenerative braking energy utilization of electrified railways, a layered compensation optimization strategy considering the power flow of energy storage systems was proposed based on the railway power conditioner. The paper introduces the topology of the energy storage type railway power conditioner, and analyzes its negative sequence compensation and regenerative braking energy utilization mechanism. Considering the influence of equipment capacity and power flow of the energy storage system on railway power conditioner compensation effect, the objective function and constraint conditions of the layered compensation optimization of the energy storage type railway power conditioner were constructed, and the sequential quadratic programming method was used to solve the problem. The feasibility of the proposed strategy is verified by a multi-condition simulation test. The results show that the proposed optimization compensation strategy can realize negative sequence compensation and regenerative braking energy utilization, improve the power factor of traction substations when the system equipment capacity is limited, and it also has good real-time performance.