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

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.