The biggest challenge for the adoption of battery energy storage system (BESS) is its affordability at an acceptable performance. The battery is the single largest cost item for BESS currently. A second-life use of the transportation battery after degradation in BESS can make the overall cost more acceptable, which is significant for the speedier and wider application of BESS in power systems. A cascaded H-bridge converter integrated with split second-life battery modules has been proposed in this paper. The relatively big parameter differences in evolving battery modules compared with the new one, such as effective capacity, impedance, initial state, and the uncertainty of degradation will lead to overcharge and overdischarge of the second-life battery modules. The underutilization of effective battery capacity will also arise simultaneously. In order to suitably integrate and control these widely different battery modules, a self-adaptation control strategy of the system based on online capacity estimation is proposed. Then, these second-life battery modules tend to react in significantly different ways according to their characteristics. Moreover, the proposed strategy can make corresponding adjustments according to parameter changes of the battery modules and is more adaptive to the dynamic operation condition. Finally, Modeling, analysis, and experimental validation are performed on a downscaled prototype in laboratory.