Abstract
The rapid expansion of the biomass power generation industry has resulted in the conversion of substantial agricultural waste (crop straw) into energy feedstock, thereby increasing the income of farmers and promoting the development of rural areas. However, the promising industry faces financial deficits because of difficulties in collecting straw from farmers. To determine strategies for overcoming the biomass supply problem, we apply Stackelberg game theory in modeling the Chinese biomass supply chain and design incentive scenarios under stakeholder risk perception. We illustrate the proposed methodology through an empirical case study on China and demonstrate the effects of incentives on farmers and middlemen. Results show that with incentives, straw quantity and stakeholder profit are expected to increase. Incentives exert a particularly remarkable effect on farmers, with such inducements producing the highest social welfare. Moreover, perceived risk dramatically affects stakeholder profit. Mitigating the risk perception of farmers is expected to significantly advance the development of the biomass power generation industry, increase stakeholder profit, and decrease the amount of incentives needed.
Highlights
China is confronted with huge challenges in balancing energy demand and environmental improvement
To convert crop straw into feedstock for biomass power plants, farmers employ two methods: (a) they transport straw from farmlands and pile straw bales near roads, after which middlemen convey the straw to collection stations for processing before the supply is sent to biomass power plants; alternatively, (b) farmers who live near a biomass power plant can borrow a machine for processing crop straw and send the processed product to the plant
“ p a q1 ́ p1 ` R M q pp f q2 ` pCt L C2 qq2 q subject to: q1 “ 0.75 ˆ q2 p a “ pm p1 ` α a q where pf denotes the crop straw purchase price charged by the farmer (US$/ton), Ct represents the transportation cost (US$/kmton), C2 is the cost of storage in the collection station (US$/ton), L denotes the average transportation distance from the collection station to the biomass power plant, and q2 is the weight of the straw collected from the farmer
Summary
China is confronted with huge challenges in balancing energy demand and environmental improvement. Straw-based biomass power generation in the country is rapidly developing. This form of alternative energy generation presents a number of advantages. Is to consider how stakeholder participation in the supply chain can be motivated and how the benefits that stakeholders receive can be optimized With these considerations in mind, we propose a Stackelberg game theoretic approach to modeling and analyzing the process of incentivizing farmers and middlemen under perceived risk.
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