Investment Perspectives: Conferring on On-Orbit Satellite Servicing

November 15, 2018 • By Sven Eenmaa, Director of Investment and Economic Analysis for the ISS National Lab

CONFERS (the Consortium for Execution of Rendezvous and Servicing Operations) hosted its 2018 Global Satellite Servicing Forum in Washington, D.C. last week. Below are some quick takeaways from the event that shed light on a subset of emerging commercial opportunities in the space industry.

The sold-out event brought together industry participants across global satellite network operators and satellite services and technology companies, as well as government agencies and regulatory bodies, providing valuable updates on the industry’s technology progress and de-risking, market demand formation, and regulatory outlook. More specifically, the areas of discussion covered on-orbit satellite servicing and rendezvous and proximity operations, such as satellite life extension and refueling, inspection and refurbishment, deorbiting and end-of-life services, as well as debris mitigation, with topics addressed ranging from more recent technology innovations to commercial value propositions, needed “rules of the road” development, and regulatory constraints.

Technology Progress Is Promising, Building on a Strong Foundation

From a technology development and feasibility perspective, on-orbit servicing, repair, reconfiguration, and assembly already have a rich history going back to the days of Skylab’s launch and the ISSInternational Space Station construction, the Solar Maximum Mission, the Defense Advanced Research Projects Agency’s (DARPA) Orbital Express, Hubble Space Telescope repairs and upgrades, and early satellite recoveries, to name a few. While some of the earlier projects clearly carried high price tags, delaying commercial adoption, the industry has subsequently seen advancements and maturation in robotics, propulsion, sensor technologies, space situational awareness, and other areas. The emergence of NewSpace companies with access to capital to accelerate technology innovation is having a direct and indirect impact here as well.

The projects receiving significant attention at last week’s forum included:

• NASANational Aeronautics and Space Administration and SSL’s (a Maxar Technologies company) Restore-L robotic spacecraft, a government-owned and -operated vehicle that aims for autonomous rendezvous with Landsat-7 for refueling and orbit relocation in mid-2020.
• DARPA and SSL’s Robotic Servicing of Geosynchronous Satellites (RSGS) program, a demonstration project scheduled for 2021 with government buying services from a multi-mission SSL vehicle.
• SpaceLogistics’ (a Northrop Grumman subsidiary) contracted MEV-1 vehicle that is expected to launch in spring 2019 and will be providing life-extension services by docking to an Intelsat satellite, to be followed in early 2020 by launch of an already contracted MEV-2 vehicle.

A number of next-generation on-orbit servicing concepts and platforms, as well as supporting technologies and services, were discussed as well, pointing to increasing de-risking of the technology roadmap.

Demand Discussion Centers Largely on GEO Satellite Service Opportunity and Market Evolution

The discussion of the value proposition of on-orbit servicing, an area in which companies such as SSL, SpaceLogistics, and Effective Space Solutions have already won contracts, provided perspectives from both government and private-sector market participants. While the commentary from DARPA, NASA, and, in particular, the Office of Space Commerce, focused on catalyzing the development of a strong commercial ecosystem, there was also an emphasis on related technology progress that would strengthen our country’s leading intelligence and defense capabilities. In addition, the technology advancements in satellite servicing are seen as feeding into development of future capabilities in areas of in-space assembly and manufacturing, repair and refurbishment, and debris removal—all needed to meet broader goals under the U.S. National Space Strategy and Space Policy Directives.

From the private market perspective, the value proposition discussion focused primarily on servicing geostationary (GEO) satellites, and there was a clear acknowledgment of the economic opportunity from satellite life extension as well as post-launch anomaly remediation. At the same time, there was strong acknowledgement of the impact that technology advancements, recent years’ high-throughput GEO satellite capacity growth, and planned sizable non-geostationary constellation projects are having on the market. The Satellite Industry Association speaker highlighted that GEO satellite orders in 2017 amounted to less than half of the 17- to 23-unit annual range seen during the five years prior.

Commentary from SES and Intelsat, each of whom operate 50 or more GEO satellite fleets, pointed to case-by-case (satellite-by-satellite) revenue generation analysis of aging satellites to assess return on investment on life-extension expenditures relative to the opportunities from technology replacement and the value of orbital real estate. With a declining ability to lock in satellite capacity sales for extended time periods, increased price sensitivity from customers, and recent years’ rapid technology evolution, the risk profile for such decisions seems to have increased. The low-risk appetite is also affecting technology choice decisions. For example, whether to attempt refueling in orbit or proceed with MEV-type docked propulsion and altitude control capabilities, which SpaceLogistics has positioned as an economically attractive five-year extension of a satellite’s life allowing for capex deferral, anomaly correction, and orbital role redefinition.

Implied by SES commentary, the number of annual satellite life-extension opportunities for their size and average life fleet looks to be modest per year. However, if the larger GEO satellite operators contract increasingly for such satellite life-extension services, then there seems to be an expectation that smaller operators will follow their lead and expand this market as well. Some of the presenter slides pointed to an annual $800 million on-orbit services market forecast over the next decade, and we would expect the confidence interval around such estimates to tighten over the coming years.

Orbital Debris Importance—Federal Communications Commission Notice of Proposed Rulemaking Expected

In addition to fleet life extension and servicing, the forum provided comments by many of the presenters regarding the need for progress on space debris solutions. Astroscale commented on debris concentration in the 600-km to 1,400-km band above Earth. According to the company’s website, there are 29,000 large-sized pieces of space debris that are trackable, along with an estimated number of more than one million smaller objects that are not currently trackable. Astroscale’s end-of-life services demonstration project is scheduled for launch in the first quarter of 2020.

As broadly reported, the U.S. Department of Defense tracks more than 20,000 objects in space, and this number is expected to increase once sensors with higher capability come online that allow the detection of smaller objects. The expected rapid growth in active satellites in orbit, increasing from the current number of more than 1,700 to more than 10,000 by 2028, is seen as raising the risk of debris resulting from anomalies and end-of-life equipment as well. The recent U.S. Space Policy Directive-3, which targets a new approach to space traffic management, puts a strong focus on establishing, revising, and enforcing orbital debris mitigation guidelines, standards, and policies domestically and via international collaboration. A near-term key regulatory development to watch here is the Federal Communications Commission’s (FCC) notice of proposed rulemaking on the mitigation of orbital debris, which is expected to provide comprehensive updates to related FCC rules. The notice is under consideration during FCC’s November 15 meeting, to be followed by a 75-day public comment period.

With a presentation at the forum from the insurance company AXA XL showing more than 30 organizations in the U.S. and internationally developing efforts toward responsible space activity, the broader legal and regulatory landscape is undoubtedly complex. The Office of Space Commerce commentary, as well as a separate regulatory panel discussion at the forum that focused on the policy considerations for satellite servicing, did highlight strong execution efforts on Space Policy Directive-2 (targets streamlining of regulations on commercial use of space) to improve relevant licensing and permitting processes as well as interagency communications in the U.S., with resulting realignment of some of the entities. Audience questions on areas related to on-orbit services—such as multi-agency approval processes, non-Earth sensing, space-based assembly, salvage rights, standards, third-party liability, and domestic and international coordination—pointed to the continued complexity of these tasks at hand.

We thank the CONFERS team for an insightful event and look forward to following the consortium’s growth and impact on the industry’s standards development!