Islanded mini-grids with batteries are crucial to enable universal access to energy. However, batteries are still costly, and how to select and operate them in an optimal manner is often unclear. The combination of variable climates with simple and low-cost passive thermal management also poses a challenge. Many techno-economic sizing tools usually consider simple battery degradation models, which disregard the impact of climatic conditions and operating strategy on battery performance. This study uses a semi-empirical Li-ion battery degradation model alongside an open-source techno-economic model to capture key insights. These are used to inform simple state of charge and temperature-based current derating strategies to increase lifetime. We demonstrate that such strategies can increase battery lifetime by 45% or 5–7 years in commercial systems already operational. It was found that, irrespective of climatic conditions, 80–90% of capacity fade can be attributed to calendar aging, due to low C-rates. SOC-based derating was found to be the most effective strategy, with temperature-based derating being less effective at extending lifetime and also leading to increased blackout periods. These results highlight the importance of accurate degradation modelling to achieve lifetime extension through improved operational strategies.