diff --git a/rust/ommx/src/convert/instance.rs b/rust/ommx/src/convert/instance.rs
index a3c993e3..00b443da 100644
--- a/rust/ommx/src/convert/instance.rs
+++ b/rust/ommx/src/convert/instance.rs
@@ -1,6 +1,6 @@
 use crate::v1::{
     instance::{Description, Sense},
-    Function, Instance,
+    Function, Instance, Parameter, ParametricInstance,
 };
 use anyhow::{bail, Result};
 use approx::AbsDiffEq;
@@ -52,6 +52,31 @@ impl Instance {
             .prop_flat_map(Self::arbitrary_with)
             .boxed()
     }
+
+    pub fn penalty_method(self) -> ParametricInstance {
+        let id_base = self.defined_ids().last().map(|id| id + 1).unwrap_or(0);
+        let mut objective = self.objective().into_owned();
+        let mut parameters = Vec::new();
+        for (i, c) in self.constraints.into_iter().enumerate() {
+            let parameter = Parameter {
+                id: id_base + i as u64,
+                name: Some("penalty".to_string()),
+                subscripts: vec![c.id as i64],
+                ..Default::default()
+            };
+            let f = c.function().into_owned();
+            objective = objective + &parameter * f.clone() * f;
+            parameters.push(parameter);
+        }
+        ParametricInstance {
+            description: self.description,
+            objective: Some(objective),
+            constraints: Vec::new(),
+            decision_variables: self.decision_variables.clone(),
+            sense: self.sense,
+            parameters,
+        }
+    }
 }
 
 impl Arbitrary for Instance {
@@ -193,11 +218,44 @@ impl AbsDiffEq for Instance {
 #[cfg(test)]
 mod tests {
     use super::*;
+    use crate::v1::Parameters;
 
     proptest! {
         #[test]
         fn test_instance_arbitrary_any(instance in Instance::arbitrary()) {
             instance.check_decision_variables().unwrap();
         }
+
+        #[test]
+        fn test_penalty_method(instance in Instance::arbitrary()) {
+            let parametric_instance = instance.clone().penalty_method();
+            let dv_ids = parametric_instance.defined_decision_variable_ids();
+            let p_ids = parametric_instance.defined_parameter_ids();
+            prop_assert!(dv_ids.is_disjoint(&p_ids));
+
+            let used_ids = parametric_instance.used_ids().unwrap();
+            let all_ids = dv_ids.union(&p_ids).cloned().collect();
+            prop_assert!(used_ids.is_subset(&all_ids));
+
+            // Put every penalty weights to zero
+            let parameters = Parameters {
+                entries: p_ids.iter().map(|&id| (id, 0.0)).collect(),
+            };
+            let substituted = parametric_instance.clone().with_parameters(parameters).unwrap();
+            prop_assert!(instance.objective().abs_diff_eq(&substituted.objective(), 1e-10));
+            prop_assert_eq!(substituted.constraints.len(), 0);
+
+            // Put every penalty weights to two
+            let parameters = Parameters {
+                entries: p_ids.iter().map(|&id| (id, 2.0)).collect(),
+            };
+            let substituted = parametric_instance.with_parameters(parameters).unwrap();
+            let mut objective = instance.objective().into_owned();
+            for c in &instance.constraints {
+                let f = c.function().into_owned();
+                objective = objective + 2.0 * f.clone() * f;
+            }
+            prop_assert!(objective.abs_diff_eq(&substituted.objective(), 1e-10));
+        }
     }
 }