Abstract: The green energy power generation industry is an important branch of China’s energy supply system. In the context of innovation-driven development, national support policies for this industry has been strengthened, in which government subsidy policies play a pivotal role. In this paper, the effect of government subsidies on the innovation output of green energy power generation companies was investigated using dynamic panel GMM and threshold effect model, with 234 listed companies of green energy power generation in 2011—2019 as research subjects. It is found that the effect of government subsidies on the innovation output of green energy power generation enterprises had a non-linear structure, and the overall effect was first inhibited, then promoted, and then inhibited again; there was an optimal range of government subsidies for innovation output of green energy power generation enterprises, below which the “rent-seeking behavior” was induced, and above which the enterprises would crowd out their own innovation input, both of which negatively affected the innovation of enterprises. Specifically, the subsidy policy of China’s current green energy power generation enterprises was not reasonable, and most enterprises did not fall into the “optimal range”, which was the most serious in wind energy enterprises. By further dividing the samples into eastern, central and western regions, it is found that rent-seeking behavior was less pronounced in the eastern region compared to that in the central and western regions, and government subsidies mainly promoted innovation output in the eastern region, while there was still a subsidy gap in the central and western regions, which need more government support. The results of the study can provide reference for establishing a sound policy system for China’s green energy industry and improving the effectiveness of government subsidy policies.