...I have something else that I don't understand in the same circuit. It also appears in both Mike DC and my transient analysis.
Using Mike's DC analysis, at any point when Vb >~1.2V, Vg = 3.0V. The FET should be off, but -Ib still shows 250mA of current flow. (the same thing is seen in the transient analysis while Vb>1.0*n) So either what am I missing, or why???
Maybe this will help. I converted my sim to a .TRAN time-based sim. I model the battery being discharged as a 1000Farad capacitor initially charged to 4V. I simulate for long enough to see where the battery voltage V(d) finishes up, and I plot V(g) and V(s) to see what they are doing, too.
Note that the circuit works as a constant-current sink while V(d)>V(s) (about 12Ks along the x-axis). In this region, the NFET is not saturated, and V(g) is what it takes to make Id(M1) = 0.25A (as determined by Vref and R4).
Once the simulated battery discharges to where V(d) = V(s), the NFet is saturated, and the opamp vainly tries to increase V(g) to keep V(s) at 1V, but to no avail. With only 5V on the opamp, V(g) cannot go higher than ~4V using an LM358. A rail-to-rail out opamp could go a bit closer to 5V.
Note that this sim shows that the circuit does not stop the battery from being over-discharged as you surmise. In fact, it continues being discharged after the V(d) = 1V point is reached, just not at a constant 0.25A!
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