A Falcon 9 rocket launches 49 Starlink satellites into orbit on February 3, 2022.
By 2040, the space industry should achieve $1 trillion in annual revenue and launch costs down 95%, according to an extensive report released this month by analysts at Citigroup.
The bank added that further lowering the cost of space access will create more opportunities for technological expansion and innovation, unlocking more services from orbit, such as satellite broadband and manufacturing.
Citi’s industry estimates are in line with forecasts published in recent years by Morgan Stanley, Bank of America and others. According to a study by the Space Foundation, the value of the global space economy reached $424 billion in 2020, up 70% since 2010.
“Income from manufacturing, launch services and ground equipment will account for the bulk of revenue growth in the satellite sector,” Citi said in a statement. “However, the highest growth rates are expected to be in new space applications and industries, with revenue projected to rise from zero to $101 billion over this period.”
Private investment in space companies, especially through venture capital, has been steadily breaking annual records over the past decade. Space infrastructure companies received $14.5 billion in private investment last year, according to Space Capital’s quarterly report, which tracks about 1,700 companies.
A number of space companies went public last year thanks to SPAC deals, but stocks in most companies are struggling despite the growth of the industry. The changing market environment, with rising interest rates hitting tech and growth stocks hard, also pushed space companies stocks down. Shares of about a dozen space companies have fallen 50% or more since their debut.
Despite Citi’s upbeat outlook, the firm stressed that much in the industry remains speculative, “for example, space solar power, lunar/asteroid mining, space logistics/cargo, space tourism, intercity rocket travel, microgravity R&D and construction”.
“A similar analogy is an attempt to predict the value of the Internet today compared to almost 20 years ago, when the term “smartphone” was relatively unknown and before broadband replaced dial-up Internet connection,” analysts say.
Startup costs are falling
Citi believes the $1 trillion space economy will be achieved by lowering launch costs, which it says have “already plummeted since the 1980s”, by about 40 times lower.
The cost of launching a rocket is usually calculated in dollars per kilogram. Citi notes that from 1970 to 2010, the average launch cost has stabilized at $16,000 per kilogram for heavy payloads and $30,000 per kilogram for light payloads.
The bank was lending to the private sector for sharp cost reductions. “Launch cost reductions were first achieved by SpaceX with the Falcon 9 launch in 2010,” Citi said. The rocket has reduced the average cost per kilogram to about $2,500, 30 times lower than NASA’s spacecraft and 11 times lower than the previous historical average.
“Essentially, with the new generation of space exploration driven by the commercial sector, the launch industry is seeing a constant shift from being heavily price-plus-cost-based to cost-based in order to open up new markets and maximize profitability.” City said. “Previously, there were a limited number of state-backed companies in the launch market that were more concerned with military capability and generating revenue and jobs than operational efficiency.”
The increasing practice of reusing rocket boosters reduces this cost. Citi estimates that, at best, launch costs could drop to around $30 per kilogram by 2040. If by 2040 each rocket “still only gets reused about 10 times,” which SpaceX is already doing, the cost will still drop significantly to around $300 per kilogram, the firm said.
The satellite market makes up the largest portion of the space economy, over 70%, and Citi says the sector is “experiencing a demand paradigm shift.”
While satellite revenues primarily come from services such as television, the bank sees an expansion in applications ranging from consumer broadband to mobile and IoT networks.
The bank believes that the vast satellite networks of SpaceX Starlink and Amazon Project Kuiper will accelerate this transition through the “wider availability” of Internet services around the world.
Another sector Citi is seeing significant growth in is satellite imagery, which the firm estimates represents about 2%, or $2.6 billion, of the current space economy. The bank predicts the expansion of the sector through space-as-a-service applications, reaching $17 billion in annual sales by 2040.
However, expanding the space economy will not be easy, the firm said, noting that the harsh environment of space, high initial capital costs and long payback periods for space projects pose significant risks to growth.
Citi stressed that seeing space as “just a hobby for billionaires” is another risk, as the industry “must gain public acceptance before it can be used in various industries.” While private company investment has lowered the cost of accessing space as more people and spacecraft fly for a fraction of what governments have been able to do, the notion that space companies are the selfish pet projects of the richest people could be detrimental to the industry’s potential. , the firm said in a statement.
For human spaceflight, Citi noted that historically, the failure rate for human spaceflights is less than 2%. But that’s “still too much for space passenger flights,” the report said, given that commercial aviation crashes at a negligible rate of around 0.0001%.
Regulatory risk is another hurdle for the industry, Citi notes. There are several federal and international organizations responsible for approving and regulating space companies.
Then space junk. Such debris poses “a rapidly growing threat to satellites in orbit, future launches and expanding capabilities in the space ecosystem,” Citi said. Tens of thousands of artificial objects are being tracked in orbit around the Earth, many of which should be in orbit but are too small to be tracked.
“This increases the risk of ‘Kessler Syndrome’ becoming a reality — the idea that space debris in orbit around Earth without air drag to slow it down will reach saturation point when it simply collides with other space debris and fragments. into smaller pieces until it eventually creates a debris field that will stop any new satellites from being launched,” Citi said.