Investment Perspectives: On-Orbit Satellite Servicing Markets Continue to Evolve

October 9, 2019 • 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 2019 Global Satellite Servicing Forum in Washington, D.C. last week. The International Space Station (ISSInternational Space Station) U.S. National Laboratory was in attendance, and we would like to share some quick takeaways from the event and its discussions that shed light on the progress of this subset of emerging commercial opportunities in the space industry.

The event brought together industry stakeholders across leading aerospace and satellite technology and service companies, emerging startups, government agencies and regulatory bodies, as well as some financial sector representation to provide valuable updates. The areas of discussion included technology progress and economic outlook of on-orbit satellite servicing in geostationary orbit (GEO) and low Earth orbit(Abbreviation: LEO) The orbit around the Earth that extends up to an altitude of 2,000 km (1,200 miles) from Earth’s surface. The International Space Station’s orbit is in LEO, at an altitude of approximately 250 miles. (LEO), covering topics such as satellite life extension and refueling, inspection and refurbishment, end-of-life services, and debris mitigation, as well as government-industry partnerships in satellite servicing, regulatory considerations, and progress toward standardization.

Technology Progress Highlighted, All Eyes on MEV-1

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, construction of the ISS, the Solar Maximum Mission, the Defense Advanced Research Projects Agency (DARPA) Orbital Express, Hubble Space Telescope repairs and upgrades, and early satellite recoveries, to name a few. However, use of such technology to validate a commercial satellite service model remains a work in progress.

At the event, we saw high interest in SpaceLogistics’ (a Northrop Grumman subsidiary) launch of its MEV-1 vehicle, which successfully launched on an International Launch Services’ Proton rocket on October 9, 2019 from Baikonur, Kazakhstan. MEV-1 has been contracted for a five-year life extension to an Intelsat-901 satellite, providing docked propulsion and servicing capabilities such as station keeping, altitude control, incline reduction, and inspection. Upon the end of the service period, the satellite will be relocated to a graveyard orbit. Intelsat has the option to transfer the service to another satellite in the fleet, if needed, as well. SpaceLogistics has also contracted its next MEV-2 vehicle to Intelsat. This vehicle’s build is well on its way, and its launch is expected in early 2020. Meanwhile, the progress of MEV-1 is likely to be keenly followed across the industry for validation of the commercial on-orbit satellite servicing opportunity.

In addition to the latest from SpaceLogistics, the forum provided updates on several other planned service vehicle deployments and models, including the following.

• Effective Space discussed its Space Drone spacecraft, which is designed as a smaller and ride-share capable, 18-year mission life vehicle. Effective Space aims to provide docked life extension services, deorbiting, and relocation services in GEO. Beyond the life extension opportunity, the company sees potential later-stage applications for its Space Drone platform in debris removal in GEO as well as active debris removal and deorbiting services in LEO.
• DARPA commented on its progress with the Robotic Servicing of Geosynchronous Satellites (RSGS) program, a demonstration project now expected for late 2022, with government providing a robotic system payload and its control capabilities. Negotiations for the selection of a commercial partner appear to be on-going, with an announcement expected by the end of the year. This partner is expected to provide a spacecraft bus tailored for RSGS requirements, as well as launch and mission control services procurement, integration, and execution.
• A presentation from Maxar Technologies pointed to continued work with NASANational Aeronautics and Space Administration on Restore-L robotic spacecraft, a government-owned and -operated vehicle that will incorporate NASA-developed tools and technologies as well as a tailored commercial bus aiming to demonstrate Landsat-7 for refueling and orbit relocation. Restore-L capabilities are expected to include in-orbit manufacturing and assembly operation capabilities as well. Per NASA’s website, the launch is targeted for 2022.
• Orbit Fab discussed its in-space refueling business model and the value of public-private partnerships, as exemplified by the company’s rapid technology progress achieved through deployments with the ISS National Lab.

Opportunities Acknowledged, Market Drivers Subject of Debate

Given the significantly higher replacement investment in GEO satellites versus those planned for yet-to-be deployed LEO constellations, we saw some convergence of opinions around the economic value proposition of servicing and life extension of GEO satellites.  At the same time, the dynamics and uncertainties highlighted at last year’s forum (i.e., high-throughput GEO satellite technology evolution and capacity growth, bandwidth pricing compression, competitive impact of planned sizable non-geostationary constellations, and resulting customer price sensitivity and reticence to enter into extended capacity commitments) have not really changed.

Although recent media reports indicate that the commercial GEO communications satellites orders in 2019 through the end of August had reached 10, showing some long-awaited recovery from five and seven units for the full 2018 and 2017, respectively, this is still well below the 17- to 23-unit annual range seen during the five years prior (Satellite Industry Association data). Additional satellite builds and capacity implications from the C-Band Alliance proposal remain uncertain. Industry expectations appear to be for 20-30 GEO satellites to be scheduled for retirement over the next five years, which should provide support for arguments of investing in a half a decade of life extension service at a fraction of cost of a new GEO satellite, enabling the delay of capital expenditures in the current uncertain environment. The life extension argument is likely to be counterweighted by monetization opportunities from technology upgrade and replacement of aged GEO assets on competitive global markets, as well as from unlocking of the value of orbital real estate.

Astroscale highlighted its insightful scenario analysis of LEO debris growth trends, as well as its outlook that the expected expansion in satellite constellation launches will result in 20-100 satellites per year requiring de-orbiting services over the coming decade. Although the increasing risk of negative externalities from space debris, given the expected rapid expansion of constellations in orbit, is clearly not a surprise to market participants present at the forum, the path to timely enforcement mechanisms to limit and mitigate such risks and compensate for active debris removal remained a subject of debate.

Per commentary at the forum, some of the closely watched, sizable constellations and service and technology providers, are likely to follow self-imposed best practices, understanding well the long-term merits of such steps to deliver stronger fleet reliability, improved sustainability and cost metrics, as well as access to lower financing and insurance costs. This is well demonstrated by the establishment of the Space Safety Coalition in September 2019, with 20 inaugural members (now expanded to 29 endorsers) and the coalition’s publication of its best practices. While we hope this very encouraging initiative will help to move the industry toward de facto standards, a voluntary willingness to commit resources by some of the more cash-strapped participants, particularly in their earlier stages of existence, is yet to be seen.

The forum also brought with it calls for higher levels of regulatory involvement to establish the market drivers; however, the environment here remains complex, and a regulatory path to support price discovery for debris mitigation models is still unclear. As discussed in recent media reports, the interagency working group mandated with drafting new space debris mitigation practices under SPD-3 has spent more than a year trying to make progress on the relevant rules. Adding to the complexity are uncertainties around budgetary prospects and Congressional authorizations for the Bureau of Space Commerce.

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!