Connecting Europe through hydrogen : Cost allocation analysis of cross-border pipeline coalitions under varying subsidy policies

Abstract

Low-carbon hydrogen can contribute to decarbonization, diversification, and energy security. Today, planning and design for low-carbon hydrogen supply chains are underway with ambitious goals for 2030-2040. The regional availability of renewable sources will require the efficient transportation of green hydrogen from producers to consumers. To increase connectivity, the European Hydrogen Backbone vision proposes developing new and repurposed hydrogen pipelines, which will require massive investment. Continental implementation requires both international coordination and cooperation, and financial subsidies can help reduce the risks associated with demand uncertainty and long-term returns. While implementers see energy policy and regulation as key enablers, policymakers seek the most efficient allocation of resources. This paper explores the impact of subsidies on cross-border pipeline project coalitions. The methodology is applied to HyCorridorE (a European south-eastern corridor) and uses cooperative game theory (core solution). Simple rules and subsidy scenarios (30% and 50%, fixed or progressive) are deployed to assess cost allocation, coalition stability, and satisfaction levels. Fixed-rate subsidies threaten coalition stability by favoring smaller alliances, while progressive designs foster cohesive, large-scale cooperation. Since simple rules fail to optimize allocation, integrating game-theoretic approaches is advisable.