Despite the continuous advancement of intelligent power substations, the terminal block components within equipment cabinet inspection work still often require loads of personnel. The repetitive documentary works not only lack efficiency but are also susceptible to inaccuracies introduced by substation personnel. To resolve the problem of lengthy, time-consuming inspections, a terminal block component detection and identification method is presented in this paper. The identification method is a multi-stage system that incorporates a streamlined version of You Only Look Once version 7 (YOLOv7), a fusion of YOLOv7 and differential binarization (DB), and the utilization of PaddleOCR. Firstly, the YOLOv7 Area-Oriented (YOLOv7-AO) model is developed to precisely locate the complete region of terminal blocks within substation scene images. The compact area extraction model rapidly cuts out the valid proportion of the input image. Furthermore, the DB segmentation head is integrated into the YOLOv7 model to effectively handle the densely arranged, irregularly shaped block components. To detect all the components within a target electrical cabinet of substation equipment, the YOLOv7 model with a differential binarization attention head (YOLOv7-DBAH) is proposed, integrating spatial and channel attention mechanisms. Finally, a general OCR algorithm is applied to the cropped-out instances after image distortion to match and record the component’s identity information. The experimental results show that the YOLOv7-AO model reaches high detection accuracy with good portability, gaining 4.45 times faster running speed. Moreover, the terminal block component detection results show that the YOLOv7-DBAH model achieves the highest evaluation metrics, increasing the F1-score from 0.83 to 0.89 and boosting the precision to over 0.91. The proposed method achieves the goal of terminal block component identification and can be applied in practical situations.