Working in and with the space environment is exciting, complex, and challenging. Looking at space through a business and commercial perspective is a bit more sobering, but at the same time, presents many profitable opportunities.
The actual space economy (manufacturing space equipment, launching into space and providing goods and services from space to terrestrial customers) is surprisingly small. Worldwide, estimates range between $150 billion and $200 billion for annual expenditures on both government space programs and on commercial space endeavors. In the United States, NASA invests about $16 billion per year and the U.S. Department of Defense about another $25 billion, with commercial and entrepreneurial space investments difficult to estimate but in the vicinity of $10 billion. Ukraine’s space budget is similar to that of many newly emerging space nations, and is slightly over $300 million per year.
Profits on space services are made here on earth, not in space. Investments in commercial space ventures must yield returns equal to or greater than other investments. This opportunity cost hurdle is not easy to overcome for space applications, mainly because the up-front costs are very high, the risks large, the markets sometimes unclear, and the return on investment years away.
However, companies are helped to overcome these hurdles by the fact that most space applications are dual-use; that is, they are beneficial to government missions as well as to commercial business. In most cases, commercial space investments occur in partnership with governments, build on very significant prior or concurrent government R&D funding, or have large government sales potential.
To touch on specifically stimulating space business opportunities that are good investments today, Ukraine has several policies that it can pursue.
First, there is an existing large market for terrestrial value-added businesses. For example, companies in many parts of the world are making profits from all types of telecommunications equipment and services, ranging from directed applications of space imagery to navigation services. New services are developed constantly and they depend on the space equipment and data for their success. Even though these are earth-based businesses, the knowledge gained by new companies of the space environment sets the stage for future new space-based business opportunities.
Second is developing partnerships with other nations. Since working in space is extremely expensive and high-risk, partnerships can spread these risks and enable even smaller nations to participate in bigger programs.
Ukraine has at least two important partnerships at present. They are a 15 percent equity ownership in SeaLaunch, a private company offering heavy-lift launches to GEO orbit from a platform that is towed to an equatorial position in the Pacific Ocean. This has been a successful venture, although a recent major accident is a significant setback that clearly illustrates the high-risk factor of space investments. The good news is that the risk is spread among others, and that it is highly likely that SeaLaunch will recover from this loss.
Another partnership is with Brazil, which also concerns launch technology. The Ukrainian-built Cyclone rocket will be developed for launching at Alcantara, a Brazilian launch site. The company formed by this partnership will jointly handle the production, launch and marketing, and will share the profits from sales.
Both of these partnerships hinge on the important launch technology capability that Ukraine developed as part of the former Soviet Union’s space program. Since launch programs leverage Ukraine’s existing capabilities, they are a logical place for Ukraine to enter into the commercial space world.
But, launch systems may not be the most profitable or best commercial space business to enter. There is a general oversupply of launch vehicles in the world, due more to political and security concerns than market demands. The up-front costs and risks are very great. Moreover, the demand for launches is dependent on the uses for space and the markets for those uses; a highly speculative growth sector in today’s commercial world. Balancing this is the reality that launch programs rarely go bankrupt because they are backed by major government prestige and political needs.
Another area of promise for partnerships for Ukraine may be to engage in supporting the European investments in the GMES (Global Monitoring for Environmental Security) program that is just getting underway. It is part of a worldwide partnership for environment monitoring systems (GEOSS), which could pave the way for very interesting and possibly profitable commercial opportunities. Such partnerships would also create a larger portfolio of space programs for Ukraine.
In summary, the long-term future of space commerce is an optimistic one, even though the shorter-term business prospects today must be approached with caution. All nations, but particularly those with relatively small space programs, would be well-advised to focus primarily on terrestrial applications and develop a multi-dimensional space program, which spreads the risks among many different space ventures and space technologies.
Prof. Henry R. Hertzfeld is from the Space Policy Institute, George Washington University.
