Clean energy is now developing rapidly, especially in the United States, China, the Britain and the European Union. To ensure the stability of power production and consumption, and to give higher priority to clean energy, it is essential for large power plants to implement peak shaving operation, which means that even the 1000 MW steam turbines in large plants will undertake peak shaving tasks for a long period of time. However, with the peak load regulation, the steam turbines operating in low capacity may be much more likely to cause faults. In this paper, aiming at peak load shaving, a fault diagnosis method of steam turbine vibration has been presented. The major models, namely hierarchy-KNN model on the basis of improved principal component analysis (Improved PCA-HKNN) has been discussed in detail. Additionally, a new fault diagnosis method has been proposed. By applying the PCA improved by information entropy, the vibration and thermal original data are decomposed and classified into a finite number of characteristic parameters and factor matrices. For the peak shaving power plants, the peak load shaving state involving their methods of operation and results of vibration would be elaborated further. Combined with the data and the operation state, the HKNN model is established to carry out the fault diagnosis. Finally, the efficiency and reliability of the improved PCA-HKNN model is discussed. It’s indicated that compared with the traditional method, especially handling the large data, this model enhances the convergence speed and the anti-interference ability of the neural network, reduces the training time and diagnosis time by more than 50%, improving the reliability of the diagnosis from 76% to 97%.