Now that I’ve wrapped up my Orbital Access Methodologies series, I wanted to share some thoughts about the business and market development side of reusable space transportation. Some of this may be old-hat for many of you, but I figured there are probably some who will find this useful and interesting. I was originally going to write this up in a single post, but I decided it would be best to split this up into a series of articles like I did for Orbital Access Methodologies.
Why Flight Rate Matters: Fixed and Marginal Costs
A common conclusion found in many studies on reusable space transportation is that RLVs need at least 50 flights per year to make economic sense. While there are a lot of assumptions that go into the specific number, the basic idea is that there’s some minimum number of flights you need to make the economics work for RLVs. RLVs typically have higher development and fixed costs, but much lower marginal costs than a similarly sized ELV. The more often you can fly an RLV, the lower your overall flight cost will be because each flight’s percentage of your fixed cost goes down as flight rate goes up.
Fixed costs are those things you have you have to pay for on a monthly or yearly basis regardless of how often you fly. Stuff like facilities, payroll, overhead, capital equipment amortization (including the air frames), etc. Marginal costs on the other hand are what it costs to add one more flight to your manifest. This is stuff like the cost of replacing any expendable components, maintenance and refurbishment costs for the vehicle, launch insurance, mission specific engineering, propellants/consumables, any touch labor not covered under fixed costs, etc.
The fewer flights per year you have, the larger each flight’s share of the fixed costs will be. In fact, at a low enough flight rate, reusable vehicles can sometimes end up costing more per flight than a similarly sized ELV. See the Shuttle as an example of this situation.
Terrestrial airlines are also in a similar situation. They also have high enough fixed costs that they are only able to stay economical is by keeping their vehicles flying as often as possible.
Now, the exact number of flights necessary for a specific RLV to start running in the black will vary a lot depending on the details. The commonly quoted magic number of 50 flights per year mentioned above depends on a lot of assumptions, not all of which may be valid. One typical assumption that may not be valid is that the development cost for an RLV will be much higher than an ELV. This may be true if you develop an RLV using the same processes you would use for an ELV, but there are arguments that there may be ways to use the fact that the vehicle is reusable to actually make development cheaper. Regardless of how the numbers come out though, the fundamental reality is that RLVs need larger flight rates than most existing ELVs see in order to make economic sense.
Achieving Higher Flight Rates: Launch Supply and Demand
In order to achieve higher flight rates, you need both a vehicle capable of high flight rates and enough demand to buy all those flights. You need both parts of the equation in order to make the business case close. The Shuttle is a good example of what happens when you try to do an RLV that doesn’t meet either of those criteria. The Space Shuttle fleet was incapable of coming anywhere near the 50-100 flights a year they needed to get to be economical, and there also weren’t 100 flights per year worth of payloads that the Shuttle could fly. The end result was a very expensive RLV system that flew as infrequently as ELVs and ended up costing several times as much.
Attacking the supply side of the problem mostly involves technology development and maturation. Operability is one key to economical RLVs–If it takes you more than a week to turn around your vehicle, there’s probably something on it that isn’t really robust enough for prime time. If your TPS system for instance takes hundreds of people weeks to inspect, maintain, repair, and qualify for reflight, it’s probably too dangerous and marginal to use on an operational system. It is unclear if the technology we have currently is up to this task, but this is an area where suborbital RLVs are having an important impact. The key will be finding technologies or combinations of technologies that allow you to make engines, TPS, and other systems robust and low-maintenance while still maintaining enough performance to make the rest of the design close.
Now, while us rocket nerds love debating things like the technical aspects of making a low-cost, robust RLV, the demand side is probably even more important. One of the common refrains you hear from industry veterans about RLVs is “where’s the money going to come from to pay for enough payloads?” As Rand Simberg used to say in his usenet tagline back when I was first getting into the whole space thing “Extraordinary launch vehicles require extraordinary markets”. While focusing on the technology side of the problem, and using an “if you build it they will come” approach to handling demand might be a great deal for those who end up buying your company’s bankrupt corpse, it’s probably not the route that ought to be taken if you actually want to make a profit for your original investors.
So, what kind of payload types are best suited for RLVs? Why don’t I start out first by talking about an important payload type that probably isn’t. Satellites–at least as they are done today–are probably not a good fit, for several reasons:
- Not very many satellites are launched per year
- Many of them are going to higher altitude destinations (high LEO, MEO, or even GEO), which most RLVs would have a hard time reaching without an expendable kick stage
- Satellites tend to go into a wide variety of orbits, including a wide range of inclinations, apogees, and perigees. This requires more mission-specific engineering, more time for regulatory compliance such as getting launch licenses (especially if the RLV is using an inland spaceport as may well be the case), and all of this generally means a lot more time between an order and a flight. This may result in a higher margin for satellite flights, but the lead times will be longer
- Satellites tend to require a lot of handholding. Lots of testing and unique integration work that may be not be applicable to any other satellite.
- Most existing satellite developers are very conservative. While price is a factor, perceived risk and insurance costs are also very important.
- Satellites don’t start showing significant demand elasticity with lower prices until the prices have dropped substantially from existing levels.
- Even if the demand does pick up, it will still take several years for that demand to ramp up, since satellite design/build/test programs can often last a long time.
Now, these problems aren’t impossible to solve. Given enough time, the market will adjust to new capabilities, and there may be ways to get higher launch demand out of existing satellite customers, using techniques like the ones Dave Salt has proposed for GEO launches (launch the propellant for the GTO and GEO insertion burns separately from the satellite itself using multiple launches and orbital rendezvous/propellant transfer). But the reality is that for the near future, satellites really aren’t that great of a market for reusable launch vehicles.
When thinking of what the ideal payloads would be for RLVs, I could think of a couple of possible criteria:
- Doesn’t need a lot of handholding, integration work, or mission-specific engineering
- Doesn’t cost tons more than the flight would
- Provides good demand price elasticity
- Is divisible into chunks small enough to be carried by light RLVs (less than 5000lb payload)
- Provides demand for flights on a regular and consistent schedule
- Provides demand for many flights to the exact same destination (for example a station in a resonant orbit).
- Is sufficiently self-similar to allow for many flights reusing the same interfaces, and the same operating procedures
- Is tolerant of risk
- Doesn’t require several years lead-time to develop the payload
As I see it, there are three main types of “RLV Friendly Markets” that I think meet these criteria: people, propellants, and “provisions” (ie light cargo that aren’t self-contained spacecraft or satellties). I’ll give a few thoughts of each of those in the following parts of this series.