<p>Biomass fuel provides a sustainable alternative for global energy needs. The process of technological innovation in biomass fuel involves numerous stakeholders. This paper examines how to balance the interests and powers of various stakeholders to foster innovation in biomass fuel technology. Focusing on the power industry, we explore the behavioral evolution and characteristics of strategic choices and interplay under various scenarios. Our findings indicate: Firstly, technology developers’ investment in biomass fuel technology exhibits a ‘threshold effect’, where initial investment promotes innovation up to a certain point, beyond which further investment yields diminishing returns and reduces their willingness to invest. Second, government green subsidies to technology developers encourage research institutes to engage in biomass fuel technology innovation. Third, high opportunity costs and risks discourage electric power companies and research institutes from pursuing biomass fuel innovation. These insights can help improve biomass fuel innovation and guide government policies.</p>