<p>Decarbonization and energy transition have increased the importance of renewable energy policies; however, renewable deployment remains constrained by high investment costs and uncertain economic incentives. This study proposes a bi-level programming model to analyze the interactions between government policy decisions and power generation decisions. The government is formulated as the Higher-level decision maker (HLDM), determining the carbon tax rate, renewable generation subsidy, and renewable investment subsidy, while Taiwan Power Company (Taipower) is modeled as the Lower-level decision maker (LLDM), determining renewable generation quantities. Numerical experiments based on eleven policy scenarios reveal that renewable generation remains highly stable when maximizing renewable penetration is adopted as the primary policy objective. Conversely, under the fiscal balancing mechanism Model, renewable investment responses remain limited and exhibit a distinct structural threshold. Sensitivity analysis demonstrates that the threshold is associated mainly with changes in the active constraint structure and feasible region rather than economically meaningful renewable expansion. The results indicate that fiscal incentives alone are insufficient to induce substantial renewable energy growth and highlight the importance of stable and directive policy interventions for achieving long-term energy transition objectives.</p>