Battery energy storage systems (BESSs) play a major role as flexible energy resource (FER) in active network management (ANM) schemes by bridging gaps between non-concurrent renewable energy sources (RES)-based power generation and demand in the medium-voltage (MV) and low-voltage (LV) electricity distribution networks. However, Lithium-ion battery energy storage systems (Li-ion BESS) are prone to aging resulting in decreasing performance, particularly its reduced peak power output and capacity. BESS controllers when employed for providing technical ancillary i.e. flexibility services to distribution (e.g. through ANM) or transmission networks must be aware of changing battery characteristics due to aging. Particularly of importance is BESSs' peak power changes aiding in protection of the Li-ion BESS by restricting its operation limits of it for safety reasons and improving its lifetime in the long run. In this paper, firstly an architecture for ANM scheme is designed considering Li-ion BESSs as one of the FERs in an existing smart grid pilot (Sundom Smart Grid, SSG) in Vaasa, Finland. Further, Li-ion BESS controllers are designed to be adaptive in nature to include its aging characteristics, i.e. tracking the changing peak power as the aging parameter, when utilised for ANM operation in the power grid. Peak power capability of the Li-ion nickel?manganese?cobalt (NMC) chemistry-based battery cell has been calculated with the experimental data gathered from accelerated aging tests performed in the laboratory. Impact of such aging aware and adaptive Li-ion BESS controllers on the flexibility services provision for power system operators needs will be analysed by means of real-time simulation studies in an existing SSG pilot.