Business Models and Demonstrations

One of the key issues when dealing with any change, in particular when challenging a well-established linear economy model, is to demonstrate that it is not only possible, but profitable as well. It is true that in most cases the effort to collect, treat, recycle and remanufacture does not seem economically viable, but that is where different and more creative business models can be applied. In this article we will discuss the business models being considered for the Ecobulk demonstrators.

The business cases are also based on the design, or sometimes perhaps the other way around. Both the design and the business model in the end must fit into each other. Above you will see the value hill, which represents how both the design and business model must create avenues to maintain value as high as possible for as long as possible. True circularity is king of the hill. For each demonstrator we will show their value hill, and discuss the implications for the business models.

  1. Autmotive
  2. Furniture
  3. Construction

The Ecobulk Final Conference will take place on the 26th of November online. Read the program and join us to learn more about the project results, and ask your own questions to the experts. 

Automotive

What is the case for the automotive sector? High levels of plastic waste (including composites) from the automotive sector – between 0.9 and 1.2 million tonnes of ELV each year – ends up in the automotive shredded residue (ASR) and disposed of in landfill or incinerated. And this is likely to increase dramatically as there is a continuing pressure to make vehicles lighter to save fuel consumption – a 10% reduction in weight can save 7-8% in fuel. But also electric vehicles can get longer ranges and smaller batteries in that case.

According to research by Oakdene Hollins, nearly 2/3 of new vehicle models are being sold to fleet management organisations. This has to do with the popularity of lease constructions, but also the rise of the sharing economy vehicle as a service models. Traditional car lease models are not focused on sustainability – in fact almost the opposite. Lease fleet managers will hold on to cars only for as long as they need little to no maintenance. They are then sold off, and what happens after that is not their business. Another interesting fact is that 6.1 million vehicles were scrapped in 2018. Average lifespan of a vehicle is now around 13 years. However, the chassis and other components inside the car can last at least up to 20 years. This apparent discrepancy is something that MicroCab expects to be able to exploit with their own take on sustainable lease models. As explained before, leasing models at the moment are short term and functionally oriented, and necessarily aimed at lifetime extension of the vehicle. This is where the MicroCab Vianova hydrogen vehicle comes in – and just like the name suggests, it proposes a ‘new way’ of doing things.

With clever modular design, combined with a well planned and regular schedule for maintenance, and repair, Microcab thinks it is quite possible to keep a fleet of cars on the road for at least 20 years. Now throw in some refurbishment options to keep the components not only working, but modern and attractive, and you have a nice recipe for retaining total vehicle value. Of course, all of this effort also has a cost – but even with this factored in, the running accumulated costs of the hydrogen car lease model vs an internal combustion vehicle compare quite favourably in the long run. Calculations show a significant savings against battery powered vehicles beyond a 10 year term. This is the time a car would typically be replaced, and where Microcab would instead do some more maintenance. Against an ICE model, the lower running costs are not low enough to offset the initial higher price, though this initial cost might decrease a lot with increasing scale of production and technology adoption in the market.

Microcab has been encouraged by these results, and has been very actively seeking further commercial and development opportunities. They have seen great interest for their technology as well as for the future of hydrogen vehicles in general. In the meantime, they are planning to expand their use of the PP-Jute material to other parts of the car, maintaining the ‘circular’ chic look.

Furniture

The furniture industry in Europe has so far shown little progress in recycling. Only about 10% of an estimated 7.6 – 10.8 million tonnes of furniture waste generated each year is currently behind recycled. Of course this is based on general categories of materials, but at Ecobulk we focused on particle board. This is because particle board furniture in general has a short life, relative to solid wood, and cannot be easily repaired or refurbished. This means large amounts of waste being generated to replace furniture pieces with mostly only cosmetic damages.

Some of the efforts went into the material itself, trying to increase the circularity by increasing the limits of using recycled particle board in manufacturing. Normally the limit is 15% due to the concentration of formaldehyde from the binder material. With the new binder materials developed in Ecobulk, this had been increased to 50% while still maintaining high structural properties and low formaldehyde emissions.

The other efforts went into the design of the furniture itself, to make the product more circular at the higher end of the value hill. The re-configurability for example extends the lifecycle by creating other furniture units once another one is no longer needed, eg a bed turns into shelving unit, etc. At one step lower, the furniture has been designed to be easily taken apart and put together again which facilitates exchanging damaged parts. This extends the useful lifetime of the product as well as maintains a higher value level. Even better, the damaged part can then be sent for remanufacturing into new particle board units.

Of course, these advantages are only evident if there is a system in place to make sure that the re-configuration and service takes place. The current systems for the collection of end-of-life furniture are mainly focused on landfilling and energy recovery, so they are not appropriate for circular purposes. In this case, we are left looking for a producer organised system, which would seem to make most sense in an institutional lease model. This would be where a large institution could outsource its furniture needs to a furniture service supplier. From the below modelling, we can see that the business case can make sense, but only with a longer term contract as breakeven is only reached after year 3.

In this case, universities where polled on the possibilities of using such a construction for student housing. Most of them found it interesting, but there were some problems. To start off with, they did not consider themselves likely to enter a long term lease contract, but also noted that student housing furniture can be quite old and the quality demands of students are not that high in that regard. In reality, a breakeven point after 3 years is also quite problematic for SMEs, so the idea was converted to a Sale and Service model.

This model is more attractive to SMEs and institutions in general, as the longer-term service contracts are more appealing to universities and the SMEs have a positive cash flow from the beginning. This would still offer the flexibility of upgrading room suites utilising the modular design of the ECOBULK furniture, while limiting the financial exposure of the furniture suppliers.

Oakdene Hollins sees good potential for this Sales and Service model growing in general. The renting economy is a small but growing trend in some other markets (e.g. clothes), and according ot surveys more than 70% of millennials  and Gen Z are willing to take part in the sharing economy. In fact,  12.6% said they would rent home furnishings. Specifically for the universities market there are several interesting developments.  For example there is significant growth in the global providers of purpose-built student accommodation which now account for 40% of all investment into student accommodation. From a social perspective, the growth of the middle class globally has led to an increase of 23% over the last 5 years of students studying outside their home country, 1.6 million students in 2016. These two factors combined mean that there is growth in the demand and well as the right type of suppliers for this business model to expand.

Construction

Wind energy is popular at the moment, with new and larger wind parks being created to capitalise on the promise of green energy. But wind turbines also have limited lifespan. Around 43 million tons of blade waste is expected to be generated worldwide by 2050 as wind energy parks decommission older equipment, out of which China accounts for 40 percent, Europe 25, the United States 16 and the rest of the world 19 percent. Considering that the main options available now for dealing with wind turbine waste are landfilling and incineration, the promise of green wind energy certainly seems to have a big sustainability blind spot.

The construction demonstrator is a circular business model through its conversion of this currently unusable waste stream into useable, commercial applications in the construction and outdoor furniture sectors. While the initial step is a downcycle of the composite GFRPs, from then on there is a theoretically endless closed loop system as the materials can be easily re-manufactured through only the addition of a small amount of virgin material. While in the project we have mostly dealt with the specific case of the wind turbine blade waste based material, the same process works with other composite wastes including industrial manufacturing waste.

The patented process developed by Conenor is flexible in its end product as well its source material. The extrusion profiles successfully produced so far include hollow ones as well as filled ones, with a whole range of sizes and shapes. Through the latest work done with ecobulk partner Aimplas, we have also learned that it is possible to create pellets of some of these materials that can be used for injection moulding. This gives yet another dimension to the possibilities for using these materials.

Initial projections of the material costs are quite encouraging. The prices are in the same range and in some cases competitively so with other similar competing products in the marketplace. These projections do not take into account economies of scale, which could significantly lower production costs as well. The cost comparison with the wood boards also does not take into account the higher maintenance costs of the wood and its lower durability in comparison with the Ecobulk materials which are naturally weatherproof and can have their colour injected during production time.

So what is the next step? At the moment many avenues are being explored on how this technology can be applied. Apart from the wind industry, there is the boating industry that also has a growing problem with waste GFRP materials from end-of-life boats. 

Questions?

If you have any questions about this, or any of the other busines cases above, you can join us for our online final conference, or contact us through the form below.

The Ecobulk Final Conference will take place on the 26th of November online. Read the program and join us to learn more about the project results, and ask your own questions to the experts.