Research on an Investment Decision Model of Waste Incineration Power under Demand Guarantee Policies

Yuqun Dong and Yaming Zhuang ()
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Yuqun Dong: School of Economics and Management, Southeast University, Nanjing 211189, China
Yaming Zhuang: School of Economics and Management, Southeast University, Nanjing 211189, China

Sustainability, 2023, vol. 15, issue 15, 1-19

Abstract: In order to encourage social capital to sustainably enter waste incineration power generation projects, policy-makers propose demand guarantee policies to ensure the fundamental interests of social capital. Nowadays, demand guarantee policies in China are artificially set based on industry experience and similar biomass power generation projects but lack theoretical support, thus bringing pitfalls to sustainable development. To address this issue, this paper constructs a decision model under the Real Option Approach to obtain investment triggers and guarantee level. Under lower, upper and bidirectional demand guarantee policies, this paper compares three Real Option models considering uncertain factors. The results show that demand guarantee policies usually have an excess guarantee phenomenon that affects long-term interests, and the lower demand guarantee policy can most effectively promote social capital to invest. Policy-makers can choose appropriate policies based on their demands or adjust existing guarantee policies to avoid the excessive guarantees phenomenon and attract social capital to invest in waste incineration.

Keywords: demand guarantee policy; waste incineration power; real option; investment decisions (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
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