Translation of the original PaperJam article «L’ingénierie financière demeure la clé»
JAN GRIMBRANDT (CEO, BOSON ENERGY)
“Financial engineering remains key”
Now backed by Paul Wurth, Boson Energy has picked Luxembourg to develop its activity in the energy field from a “circular economy” perspective. Its CEO, Jan Grimbrandt, explains this choice.
After the common announcement of the close cooperation between Paul Wurth and Boson Energy, the ambitions of the young company based in Grevenmacher grow higher. He appreciates finding in Luxembourg a fertile ground to develop a circular economy model.
Mr Grimbrandt, do you think that the concept of circular economy is really well understood and assimilated in the business area, or is there still a lot of evangelization to do?
Jan Grimbrandt (Boson Energy):
"Being 'circular' makes a lot of sense in the business"
“Generally speaking the concept of ‘Circular Economy’ is starting to sink in - so it is not like we are starting from scratch. This being said, the ‘circular economy’ is a VERY disruptive concept, and I get that there is a long way to go to grasp all its implications at all levels – on technology, on commercial, and on operation level.
Going circular rather than ‘greening’ a traditional linear ‘selling stuff’ model requires novel approaches from both companies and consumers, as well as from the public sector. So yes, there is more ‘evangelizing’ to do, but more importantly we need to provide real life examples and working business models where we have go from selling ‘stuff’ to selling performance over lifecycle.
If producers don't take that step and responsibility, the incentives in the value chain will not be what they have to be – and ‘circular’ will go nowhere. I am a fundamental believer in change being commercially driven, and going circular makes very much business sense - so companies which are able to do this right, will be able to ‘square the circle’.
Is Luxembourg a perfect laboratory for such developments?
I think that Luxembourg has a number of interesting assets to take a driver seat when it comes to circular economy. First, the country has maintained an industrial base which produces high-added value products and employs highly skilled people. Having an industrial base obviously helps if you want to be successful in innovating and reinventing industrial products and processes. Boson Energy has chosen Luxembourg, and we have found competent strategic partners with an ambition to innovate in Paul Wurth, SAB and Apateq.
Second, Luxembourg is investing heavily in ICT, and its emphasis on data security, on computational power, and on big data analytics are critical in a performance economy.
Take our domain solid fuel gasification as an example: Gasification is ancient technology and very much bricks and mortar, but to get the performance you need out of it over the lifecycle, you need advanced controls to keep the process optimized; you need to model wear to optimize construction, maintenance, and service; you need to understand and model the end clients’ usage of the power and thermal energy you produce. Our employee number 10 here in Luxembourg was a mathematician who will work with deep learning in all aspects of our technology and business, and industrial companies like ours did not hire mathematicians 10 or even 5 years ago – now we do.
Third and last; Luxembourg has successfully transitioned from a very much industrial to a very much service-based economy, and having gone through that transition once, will help Luxembourg make the next move from a linear to circular model.
“There will be no change of paradigm
without the right financing tools.”
Jan Grimbrandt, CEO of Boson Energy
Financing and financial engineering will play a key role in the shift from selling stuff to providing performance over lifecycle – so here the Financial Place comes in very handy, provided it is ready to make this shift.
Finally, Luxembourg’s size, its pro-business stance, and the support of the government will also play a key role here.
How must the ways of financing be adapted to answer to the circular economy’s challenges?
First of all, let me be clear that there will be no paradigm shift without the right financing tools. The word circular says it all – it has to ‘encircle’ the entire business eco-system, all the way from mechanical engineering to financial engineering.
If we as a business sell performance over lifecycle, we will also want performance over lifecycle from our suppliers, and they will push it further in turn.
But at some stage raw material will have to be bought (new or recycled), and that has to be financed.
The business of keeping money on bank accounts is not that good in a negative interest world. ‘Traditional’ financing institutions, banks, will have to take a leap of faith, or they will completely loose their relevance in financing a circular world.
To deliver performance over lifecycle there needs to be ‘stuff’ in place even if it is powering a service rather than sold, so financial engineering is key.
Today, institutions that are not ready to build the competence it takes to add value, nor to share the risk that comes with it will not tap into the rewards.
Other institutions will eat up their space in the value chain, just as pension funds are now eating up middle-man space in solar and wind and managing those projects on their own.