Subsidy or not? How much government subsidy can improve performance level of energy-saving service company?

Contract energy management model is a new energy-saving mode based on single market mechanism. Due to its externality, the energy efficiency market cannot realize the optimal allocation of resources. Government energy-saving subsidy can solve the market failure of energy-saving service market and improve the performance level of energy-saving service company. However, due to the unbalanced support fields and single incentive tools in the government incentive policy, the incentive effect of the government subsidy policies for contract energy management projects is not satisfactory. Based on a two-stage dynamic decision-making model, this article analyzes the impact of different forms of government subsidy policies on the performance-level decision-making of energy service company, and draws the following conclusions: (1) The effect of the government's variable subsidy policy with payment conditions is better than the fixed subsidy policy without payment conditions. (2) Government incentive policy for contract energy management needs to be directed against different energy-saving fields. (3) The government should adopt different forms of incentive policies for energy-saving service companies with different energy-saving levels in the same energy-saving field. (4) When the government implements the variable subsidy policy with preset energy-saving target, each within a reasonable range, with the increase of which, the incentive effect on energy-saving service companies with lower energy-saving level decreases. When the subsidy policy has no incentive effect, it is more unfavorable for the energy-saving service companies which are below the average level of the industry.

Automated summary

The contract energy management model is a new energy-saving mode based on a single market mechanism. Due to its externality, the energy efficiency market cannot achieve optimal resource allocation. Government energy-saving subsidies can solve the market failure in the energy-saving service market and improve the performance level of energy-saving service companies. However, due to the unbalanced support fields and single incentive tools in government incentive policies, the incentive effect of government subsidy policies for contract energy management projects is not satisfactory.