Revised 2001
In
1993, 6 aerospace companies got together
in a partnership with NASA's Langley Research Center to look at the markets for
future commercial space launch vehicles.
The study, published in 1994 had the objective of examining individual
market segments and how they might expand if lower prices were charged to
customers. The full study is available at http://www.hq.nasa.gov/webaccess/CommSpaceTrans/. Further information about space markets is
available at a page maintained by Jim Kingdon http://www.panix.com/~kingdon/space/markets.html
.
Most of
the CSTS consists of a detailed examination of the current and future potential
state of various markets (communication satellites, science missions, fast
package delivery, tourism etc. etc.) at various assumed transportation
costs. Here are some of the details of
the CSTS Conclusions and Recommendations.
The
principle information of interest is an overall market model for future
commercial space transportation. The market model is separately presented for
an assumed new launcher of four payload classes (10,000, 30,000, 55,000 and
100,000 pounds). For each payload class,
the number of flights per year "captured" by the vehicle at different
market prices (expressed in $ per pound to low earth orbit) is given. The number of flights per year is derived by bringing together in some manner
the number of flights generated by the individual market segment studies. Each market segment study was done by a
different team, and the market predictions from each market segment study
aren't necessarily in a consistent format.
The methodology by which the
results of the various market segment studies were combined is not explicitly
given, and it is thus not evident how the total number of captured flights in the Conclusions section breaks down
into market segments. It seems
reasonable to assume that in any such exercise, there is lots of room for
legitimate disagreement on how to do the calculations - the final published
numbers may thus perhaps seem to be overestimates by some parties, and
underestimates by others.
The
following data are the market model presented by the CSTS in its Conclusions
section. The first and third columns
are directly from the report, while the
second and fourth columns are directly calculated from the data. All
payloads are to a nominal low earth orbit.
Many of the payloads are
destined for higher orbits, and are assumed to carry their own upper
stage. LEO masses for these payloads
include the mass of the payload and of an assumed upper stage. The market model in this posting is the
"medium" model, referring to the market size having a
"medium" probability of being achieved. The Conclusions also give a "High" or conservative
market model (not shown in this posting), which has a high probability of being
achieved - this market model necessarily shows a lower flight rate than the
"medium" model. The market
price shown below as $5000 per pound is actually listed in the model as the
"current" price - I have substituted "$5000" as this seems
from a graph in the Conclusions to be the numerical values of the
"current" price.
Vehicle
payload capability 10,000 lb to low earth orbit
|
$ per lb |
revenue per flight ($M) |
annual flights captured |
annual revenue ($M) |
|
5000 |
50 |
5 |
250 |
|
1000 |
10 |
48 |
480 |
|
600 |
6 |
81 |
486 |
|
400 |
4 |
269 |
1,076 |
Vehicle
payload capability 30,000 lb to low earth orbit
|
$ per lb |
revenue per flight ($M) |
annual flights captured |
annual revenue ($M) |
|
5000 |
150 |
5 |
750 |
|
1000 |
30 |
38 |
1,140 |
|
600 |
18 |
82 |
1,476 |
|
400 |
12 |
161 |
1,932 |
Vehicle
payload capability 55,000 lb to low earth orbit
|
$ per lb |
revenue per flight ($M) |
annual flights captured |
annual revenue ($M) |
|
5000 |
275 |
3 |
825 |
|
1000 |
55 |
21 |
1,155 |
|
600 |
33 |
70 |
2,310 |
|
400 |
2 |
95 |
2,090 |
Vehicle
payload capability 100,000 lb orbit
|
$ per lb |
revenue per flight ($M) |
annual flights captured |
annual revenue ($M) |
|
5000 |
500 |
2 |
1,000 |
|
1000 |
100 |
10 |
1,000 |
|
600 |
60 |
41 |
2,460 |
|
400 |
40 |
41 |
1,640 |
I am told
by someone who worked on the study that the markets for the different launcher
sizes are not additive, but represent the market captured by a single new low
cost vehicle which is only in competition with existing launchers. The flights captured column for a 30,000
pound class launcher will thus presumably include both multi payload launches
of 10,000 lb class payloads, and launches of segments of larger payloads which
otherwise might have been launched in one piece on a 55,000 or 100,000 lb
launcher.
For a
cost of $5000 per pound (the current cost), a new vehicle captures only a few
flights, with the number captured being only a fraction of the projected
flights shown elsewhere in the study for assured markets such as communication
satellites. This presumably represents
competition from existing launchers.
For all launch vehicle classes, there is a sharp increase in payloads
captured in moving from $5000 per pound (current costs) to $1000 per pound. This presumably results not only from
the generation of new business due to
market elasticity, but from the capturing of payloads from other launchers so
that the new launcher controls most or all of a market segment.
Lowering
the cost of flights to $600 or $400 per pound generates additional flights by
attracting new payloads. However, the
total available revenue grows only slowly as the number of flights expands, as
cheaper flights generate less revenue per flight. Thus, in the 10,000 pound launcher class, going from $1000 per lb
to $400 per pound increases the number of flights more than 5 fold but only
doubles the revenue. When the cost of
flights gets very low, the larger launchers even suffer a reversal in fortune
where the cheaper they are priced, the less revenue is gained. A priori, the
annual revenue shown above must pay for such items as:
The CSTS
developed a financial model for the payback of development costs. Its
assumptions include:
Commercial Feasibility
The CSTS
evaluated commercial feasibility by the internal rate of return generated by a
hypothetical investment in a new launcher.
The Conclusions section states:
"Private investment in space transportation can only be a feasible venture if the investors can be repaid. One measure of success is the internal rate of return (IRR). An IRR of 15% to 25% over the first 10 years of operations has been selected as the target value to evaluate commercial feasibility."
The CSTS
then gives a two graphs, from which it is possible using a ruler and some
patience to determine the annual payback which is required for different
development costs, assuming different required IRRs. The following data are derived
by interpolation of data taken from graph 4.1.3-3 in the CSTS Conclusions
section. Their estimated accuracy is
plus or minus 5%.
Required
Annual Payback ($M) for various IRR
|
Development
cost, $M |
15% IRR |
20% IRR |
25% IRR |
|
1000 |
340 |
480 |
660 |
|
2000 |
680 |
960 |
1320 |
|
3000 |
1020 |
1440 |
1980 |
|
4000 |
1360 |
1920 |
2640 |
|
5000 |
1700 |
2400 |
3300 |
The
market model shown earlier in this posting indicates that the maximum annual
revenue from a new launcher is on the order of $1,000 million to $2,000
million. If 50% of the revenue from a
new launcher is devoted to payback of development costs, then the maximum
revenue available for this purpose ranges roughly from $500 million to $1000 million
per year, depending on the launcher size and cost per pound to orbit. The annual revenue for repayment of
development costs might be very much lower than this if the new launcher has
high operating costs. It could also be
somewhat higher than this, but not by a large ratio as there is an absolute
upper limit set by the total available revenue, even assuming that operating
costs were zero.
Some
major aerospace companies have estimated the development of an SSTO vehicle to
cost around $5000 to $6000 million (although some people think that it can be
done for less if the project is structured correctly). With an upper limit of
say $1000 million annual revenue available for development cost payback, a new
launcher requiring $5000 million to develop and requiring annual paybacks of
$1700 to $3300 million clearly cannot be a commercial success if the CSTS
financial and market models are reasonably correct.
The
Conclusions section of the CSTS states in part:
"This market study did not address the cost of space launchers, nor the technical requirements to achieve specific launch costs goals. However, this analysis indicates that as a commercial investment measured at standard industrial investment return levels, the investment cost for a new space launch system must be kept in the range of a few billions of dollars."
"This indicates a potential paradox in the commercial space
transportation market. High flight
rates appear to be necessary to reduce the price per flight. However, reduced prices per flight reduces
the revenue per flight, and consequently the cash flow available for investment
payback."
“We have not been able to prove the commercial space market elastic
enough to enable the revenues per flight to be greater than the combined
payback and operations costs per flight for a completely commercially developed
system."
"To attract commercial investment it appears that some form of government
participation will be necessary"