A backup power automatic switching device fault identification method and a system relate to a transformer substation backup power automatic switching method and a system. The method comprises the following steps of concentratedly installing a merging-unit intelligent terminal integration device on a buscouple and an incoming line, collecting voltages of a bus and the incoming line, currents of the incoming line and a section and a switch position, sending an optical signal message to a backup power automatic switching device, simultaneously receiving and executing a command from the backup power automatic switching device so as to control operation of a circuit breaker; automatically determining a current direction by the backup power automatic switching device and taking as a basis of fault positioning; and when a backup power automatic switching starting condition is satisfied, determining whether there is a bus fault or a transformer fault by the backup power automatic switching device, and then according to a strategy, executing backup power automatic switching logic and automatically identifying a fault type. The system comprises the backup power automatic switching device, the merging-unit intelligent terminal integration device, a direction monitoring unit used for monitoring a line current direction and a size in real time, and a fault determination and positioning monitoring unit. In the invention, power supply reliability of a power grid and power grid operation stability can be effectively increased.