Feed-in tariff strategy of waste heat and residual pressure power generation in steel enterprises based on the Stackelberg game

This study analyzes the feed-in tariff strategy of steel enterprises in the context of the steel industry’s electricity market, which is composed of waste heat and pressure (WHP) power generation and traditional thermal power generation. A Stackelberg game model was developed to compare three pricing strategies (i.e., fixed price, fixed premium, and variable premium) for the feed-in tariff of WHP power generation technology among steel enterprises, traditional fossil fuel power generators, and local governments. Three pricing strategies for WHP generation feed-in tariffs are compared, and numerical simulations are run to examine the effects of market size, WHP generation cost coefficients, and steel firm environmental costs on optimal regulated prices, optimal steel firm profits, and optimal total social welfare, respectively. The following findings are obtained. (1) For optimal price regulation, increasing the market size and the coefficient of WHP generation cost has little effect on the optimal price regulation under the fixed price policy. The only way to increase the price of the fixed price policy is to increase the environmental cost of steel enterprises. Moreover, increasing the market size and the coefficient of WHP generation cost will reduce the price of fixed premia. Additionally, increasing the market size and the coefficient of WHP generation cost will reduce the price of fixed premia. Increases in market size and WHP generation costs will raise the price of variable premium insurance, whereas increases in enterprise environmental costs will lower and maintain the price of variable premium policy. (2) For optimal steel enterprise profit, increasing the market size and the cost coefficient of WHP generation will increase the profit of steel enterprises under the fixed premium policy. However, it will have little effect on the profit of the fixed price and variable premium policies. Moreover, increasing the environmental cost of enterprises will reduce the profit of the fixed premium policy, but it will have little effect on the profit of the fixed price and variable premium policy. (3) For optimal total social welfare, increasing the market size and environmental cost of steel enterprises can increase total social welfare under the fixed price policy. Moreover, increasing the coefficient of WHP generation cost has little effect on the fixed price policy welfare; increasing both the market size and the coefficient of WHP generation cost has little effect on the fixed premium policy welfare. Additionally, increasing the environmental cost of enterprises can increase the fixed premium policy welfare, and increasing the market size can increase the total variable premium policy welfare. Meanwhile, increasing the coefficient of WHP generation cost and the environmental cost of steel enterprises can reduce the variable premium policy welfare and finally level off. (4) Depending on the decision maker’s preferences, various optimal decisions can be made. Higher subsidies imply higher optimal regulation prices, which are accompanied by market riskiness, thus influencing the rate of market development of waste heat and waste pressure power feed-in tariffs. In optimal rule prices, low riskiness and low subsidies are fixed price strategies, high riskiness and moderate subsidies are fixed premium strategies, and high riskiness and high subsidies are variable premium strategies. In optimal steel firm profit, low riskiness and low subsidy, high riskiness and high subsidy, and low riskiness and high subsidy are fixed price, fixed premium, and variable premium strategies, respectively. In optimal total social welfare, moderate riskiness and moderate subsidy, low riskiness and low subsidy, and high riskiness and high subsidy are fixed price, fixed premium, and variable premium strategies, respectively.