In order to advance the instruction of the Smart Grid, resolve the peak regulation problem brought by new resources connected to the grid, and change the situation that hydropower peak regulationis regulated freely, analyzing the component of the hydropower peak regulation and indicating that the cost is mainly the opportunity cost which is produced by the change of water consumption rate in the process of regulation. By analyzing problems in our present hydropower peak regulationtrading mechanism, indicating the necessary of building hydropower peak regulation market in China, Based on the peak regulation right, proposing the building rules, option methods and pricing methods of the hydropower peak regulation market which is adapted to the present situation in our country. Example shows that building a hydropower peak regulation market can bring reasonable income for hydropower generating units, and then effectively improves the positivity for hydropower generating units to regulate, resolves peak regulation in the smart grid, improves ratio of energy utilization and realizing optimal allocation in resource.