Study on government subsidy in a two-level supply chain of direct-fired biomass power generation based on contract coordination

Biomass power generation is helpful to build a clean, low-carbon, and green energy system, but the shortage of raw materials supply severely restricts the development of the biomass power generation industry in China. To solve problems of supply chain disharmony and low efficiency of government subsidy caused by stochastic factors in biomass power supply chain, this paper studies the decision-making of government subsidy on biomass power generation supply chain. First, a two-level supply chain model under stochastic supply and stochastic output environment is built. The two-level supply chain consists of farmers and the biomass power plant. Second, to achieve the coordination of the two-level supply chain through the calculation of the model, it sets up the combined contract model based on surplus compensation, shortage penalty, and revenue sharing. Then, the validity of the contract is demonstrated by the data obtained from the field survey. Finally, depending on the model and contract coordination results of the supply chain, the impacts of government subsidies on two members' decision-making are analyzed, and the changes of members' profits and chain's profits are discussed. Therefore, the government subsidy strategy for biomass direct-fired power generation is proposed.