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In the electricity market, various market risks have been the main problems that the market participants have to face with and handle, including operational risk, credit analysis, price risk and so on. Among these risks, price risk is one of the basic problems according to the centralization location of electricity prices and their great influence on the benefits of the market participants. To solve this problem, our discussion and analysis of electricity price will almost focus on the volatility analysis, which is proposed by wavelet transformation in this paper. According to wavelet analysis, electricity price series is expanded to its wavelet series, which in different scales are orthogonal. And reconstruct price component series give a proper interpretation of the original price, by using which we identify price volatility and analyze on its mechanism. Finally the real data in New South Wales electricity market are applied to test the proposed model.