This paper proposes a novel method to calculate the best installed capacity of pumped storage power station. First, we choose the day with maximum load as the typical day for every month and simulate the system running in two cases of whether the pumped storage power station is put into operation. The difference of the total coal consumption between the two cases is the peak load shifting benefit. Furthermore, we build load model and power generation model to calculate the benefit of emergency use and frequency modulation, which are the major projects of dynamic benefits. At last, on the premise of ensuring the system requirements, the developed method employs the maximum benefit of the unit capacity as the objective function to get the best installed capacity of pumped storage power station by simulations. Tests on a provincial power grid have shown that the developed method which combines of load characteristics, electric structure and other factors can get the best installed capacity of pumped storage power station easily and has a certain guiding significance for the planning and construction of the pumped storage power station.