High penetration of renewable energy sources (RESs) in distribution systems leads to reverse active power and voltage rise in low voltage (LV) grids, which limits the hosting capacity. Energy storage systems (ESSs) have been used to improve the hosting capacity by decreasing the reverse active power in some literature. ESSs can still improve the hosting capacity more by providing reactive power. The reactive power shows a little effect in existing researches, because they have mostly simulate LV grids without modeling transformers. However, the high reactance of the transformer magnifies the effectiveness of the reactive power control even more than the active power in some buses. This paper develops an optimal method for placement, sizing, and active and reactive power control of a central ESS to improve the hosting capacity. The simulation results in highly RES penetrated grids at Germany show the effectiveness of the proposed method.