The Space Economy – A New Frontier

On the 2nd of August 2020, astronauts Bob Behnken and Doug Hurley splashed down in the Gulf of Mexico, just off of the coast of Florida. The “landing” marks an impressive finale to the Crew Dragon Demo-2 mission between Nasa and Space X, which saw astronauts depart from American soil for the first time in nine years. 

The partnership marks a fundamental change in the way that NASA has operated in the past. Instead of developing the technology themselves, they have begun to contract out private companies – such as Space X. This first-of-its-kind public-private partnership shows the Agency’s realization that profit-seeking private enterprise might bring down costs through increased efficiency; bringing Space much closer in reach to a whole new market.  

What Changed? 

Between 1964 and 1973, NASA’s Saturn V program carried 24 astronauts beyond the Earth across 13 launches. Adjusted for inflation, each launch cost the government $1.23 billion. For fledging companies launching small payloads, this cost is way out of reach. The reason behind such a high cost was that each part of a Saturn V launch vehicle would only be functional for a single launch. As a result, the new wave of Space-faring companies has prioritized reusability – decreasing cost through increased efficiency. 

Sinead O’Sullivan, a Space Economist and Entrepreneurial Fellow at Harvard Business School attributes the primary propellant for the emergence of the Space Economy to a reduction in launch costs. She noted that recently, launch costs have reached only $2,500 per kg, whereas they used to be as high as $50,000 per kg. 

In the words of Elon Musk, the CEO of Space X: “Imagine if airplanes could only fly once, not many people would fly.” His company’s Falcon 9 rocket, which fueled the Nasa-Space X joint venture, has placed them firmly at the forefront of reusability. Each booster is designed to be reusable up to 10 times. Instead of falling into the ocean, the boosters rotate and land upright on football-field size landing pads. 

Blue Origin, a close competitor spearheaded by the equally eccentric Jeff Bezos, is also developing reusable rockets. Like Space X, the company has entered into a contract with NASA to develop the technology to return to the Moon in 2024. 

Liberation of the Space Economy

This reduction in launch-associated costs will fundamentally increase access to Space. As costs decrease, barriers to entry will fall; more companies will be able to take advantage of opportunities that were previously out of reach. A Morgan Stanley report estimates that the “Space Economy” could grow by 3x to over $1 trillion in twenty years. 

Morgan Stanley believes that much of this growth in the next 20 years will be propelled by satellite broadband – 50% in the base (expected) scenario and 70% in the bullish (optimistic). Many companies are already moving to seize the opportunity that worldwide internet and data transfers present, especially in developing countries with typically poor data infrastructure.  Blue Origin’s project Kuiper and Space X’s Starlink are two examples. The latter has already launched 597 low earth orbit satellites and has approval from the FCC for up to 1,000,000 internet routers. 

Many other sectors are equally poised to take advantage of the opportunities that access to Space can offer. Vehicle manufacturers will need to take advantage of Earth observation satellites as autonomous vehicles become more prevalent. At the same time, according to Sinead O’Sullivan, “one library of congress is created worth of data from satellites” only every few hours; data analytics companies will need to find innovative ways to sift through this and find the most pertinent information. 

Morgan Stanley points out that greater efficiency in reusable rockets will encourage innovation elsewhere in the Space Economy as well. Mass production of satellites, for instance, could decrease the cost to as low as $500 thousand per satellite from $500 million today, according to the report. 

As Space-faring companies become more experienced, launches become cheaper, and safety becomes more assured, the economy will also open up to Space Tourism. One notable example, Sir Richard Branson’s Virgin Galactic, is planning on flying paying passengers beginning in 2021 at the earliest. So far, around 600 people have signed up and the company has secured $60 million in deposits on tickets worth $250,000 each. 

In Summary

Although Martian cities and 45-minute spaceship travel around the Earth may still yet be far off, the new “space-age” has shown an improving economic case to expanding reach into Space. From autonomous vehicles to providing internet access to historically disconnected areas, the benefits are clear.  The successful public-private partnership between Space X and NASA marks the beginning of a more exciting chapter in Space and the beginning of a new, economic, frontier. 

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