Abstract: To cope with such problems existed in pumped storage power stations in China as the pressure of investment cost recovery, the lack of social investment willingness and the lack of connection with market development, a two-part electricity price market connection mechanism of pumped storage power station was designed, in addition, a life cycle benefit evaluation model of pumped storage under the market-oriented mode was established to calculate the profit space of pumped storage participating in the market. By means of the life cycle period simulation of pumped storage power stations by capacity electric price and electrical capacity charge, it was found that the approved capacity electricity price existed a downward trend and this trend tended to be stable, and the capacity electricity charge emerged the U-shaped changing trend. Research results show that the designed two-part electricity price market connection mechanism can make the pumped storage power stations obtaining reasonable income in the electricity market and stepwisely reducing the proportion of the approved capacity electricity price covering the power station capacity to help the pumped storage power stations smoothly converted to the identity of an independent market subject.