Based on low utilization rate of energy and high fuel consumption, the energy losses in the hydraulic excavator during typical working condition were analyzed, and the major directions of the energy saving research for the hybrid power system were derived. A parallel hydraulic & electric configuration for hybrid excavator was proposed based on capacitor and motor. For the hybrid power system based on SUNWARD 20T hybrid excavator, the paper established simulation model, and the effect of the power coupling characteristics, the control strategy, the capacitor’s State Of Charge on the hybrid excavator were studied by contrast calculation and simulation. And the key parameters were optimized and matched. At last the energy saving effect was studied by building test platform of hybrid system, and found that adopting the parallel hydraulic & electric system, selecting the appropriate parameters in power coupling, instantaneous optimization of control strategy, compensating parameter of capacitor SOC are helpful to improve the energy saving effect of hybrid excavator, and the energy saving efficiency can reach above 20%.