An intelligent substation representing the substation technology development tendency is an important component of an intelligent power grid. Configuration of the intelligent substation has an important influence on system security and economic operation, and is an important question worthy of being researched. On this background, the invention provides an optimization strategy for upgrading a conventional substation to an intelligent substation in a power distribution network. Firstly, an intelligent upgrading optimization model of the substation in a power distribution system is constructed by taking minimization of the sum of the intelligent upgrading cost of the substation and the customer interruption cost as an objective function, and considering the constraint conditions, such as a constraint condition that two reliability indexes including the system average interruption time and the low-power average value are not beyond given threshold values; then, a fault clearing model for faults of the power distribution system is developed; a method for evaluating the customer interruption time more accurately is provided; then, linear processing of the customer interruption time and a customer interruption loss function is carried out; a mixed integer linear programming model for the intelligent upgrading problem of the substation is obtained; and furthermore, solving is carried out through a high-efficiency commercial solver.