A generic model to allocate costs

Building infrastructures is essential to support today’s energy transition to a more sustainable future. Such infrastructures are often used by multiple parties. Disagreement regarding the distribution of the construction costs of these infrastructures among the parties that wish to utilize the infrastructure can delay the construction, or even prevent the construction from taking place, thus delaying the transition to a more sustainable future. To make such collaborative infrastructure construction projects possible, it is therefore essential that joint costs are allocated to the different parties in a well-supported manner. The article introduces, by means of a general mathematical model, a method for this cost allocation.

The cost allocation rule is in line with existing game-theoretic concepts and satisfies certain desirable properties. The method guarantees that the cost allocation will always be such that: all potential subgroups of infrastructure users will be allocated costs that are lower than, or equal to, the costs they would incur if they worked together as a separate subgroup and built a (possibly smaller) infrastructure that meets the subgroup’s requirements provided that the cost function satisfies certain properties.

Furthermore, the costs allocated to each “existing” user will not increase as the number of users increases. In addition to the general theory, the article provides a practical example regarding an infrastructure of great importance to achieve a reduction in CO2 emissions: the cost allocation of a CO2 transport infrastructure for carbon capture, use and storage.

About PZEM

In 2023, PZEM strengthened its market position by joining the EPH group, with EP Netherlands as its new shareholder and owner. EP NL is a Dutch energy company focusing on energy trading, the supply of electricity and gas, the management of a significant portfolio of sustainable PPAs (Power Purchase Agreements), as well as the operation of power plants. This partnership brings together more than 100 years of experience in the energy sector and enables us to realise our shared ambitions as a reliable and ambitious player that actively has contributed to shaping the future of the energy sector. With a cumulative capacity of 2.6 GW, EP NL has become one of the largest power plant operators in the Netherlands.