An excerpt from Jack Giddy's article, ‘The Future of the Space Economy’.
Approximately 10,000 satellites currently orbit Earth. However, by 2030 as many as 60,000 satellites are estimated to be in Earth’s orbit. The global space economy is forecast to reach c.$1.8 trillion by 2035, up from c.$630 billion in 2023. Furthermore, the historical growth since the beginning of the ‘Space Race’ alongside the projected expansion in ‘backbone’ and ‘reach’ applications demonstrates a promising future for the space economy and our understanding of the universe.
McKinsey divide the space economy into two segments: 1) ‘backbone’ – space applications that produce public good benefits e.g., satellites, launchers and navigation (like GPS), and 2) ‘reach’ – space applications that produce goods that can be exchanged e.g., satellite data transmission and commercial space travel (tourism). Between 2023-35, the value of the global space economy is forecast to grow at a c.9.1% CAGR; a faster rate than global nominal GDP. ‘Reach’ applications are forecast to grow at a greater CAGR than ‘backbone’ applications over the next decade due to the development of new commercial subindustries within space.
The space economy has developed considerably during the 21st century, namely the shift in investment from primarily governments and agencies to the emergence of private companies with deep pockets. Another major development has been space tourism; the introduction of private companies has enabled a completely new commercial side to space. Alongside space tourism, there are other subindustries coming into view that are contributing to the acceleration in the space industry such as space mining and manufacturing. The satellite industry also remains a key component of the space economy and has been accelerating at a rate faster than ever before in recent years.
The history of space exploration
After the conclusion of World War II, where Germany had pushed the possibilities of long-distance rockets with the V-2 (world’s first large-scale liquid-propellant rocket vehicle), the United States and Soviet Union started their own space programs – and the Space Race began. In 1957, the USSR launched Sputnik I, the first artificial satellite to orbit Earth and a month later deployed Sputnik II, a satellite carrying a living being, a dog called Laika. The US were slightly behind the Soviets, with two failed attempts to launch a satellite in 1957 before launching their first satellite in 1958 but a commitment by the US to space exploration was declared at the end of 1958 with the creation of the National Aeronautics and Space Administration (NASA).
The next stage of the Space Race began with sending humans to space – in 1961, Yuri Gagarin, a Soviet pilot and cosmonaut, became the first human to enter space followed three weeks later by an American astronaut named Alan Shepard. Following Shepard’s orbital flight, US President John F. Kennedy announced America’s next goal - “I believe that this nation should commit itself to achieving the goal, before the decade is out, of landing a man on the Moon and returning him safely to Earth.” Despite falling short to the Soviets in many milestones throughout the Space Race, the US sent the first astronauts to the Moon in 1969, with Neil Armstrong becoming the first person to walk on the lunar surface.
The creation of space stations indicated the next phase in space exploration; the USSR and US launched their first stations in 1971 and 1973, respectively. In 1975, the Space Race came to an end with the first international space mission with Soviets and Americans collaborating in a declaration of peace. Human exploration in space has been restricted to low-Earth orbit since 1972 – countries across the world continue to carry out research on the International Space Station which was launched in 1998 and has been occupied since 2000.
Technological advancements throughout the Space Race have made the current and future developments in space exploration possible. The United States went from a spend of $0 on space exploration in 1948 to over $100m in 1957 and $7bn by 1967. Funding for space exploration by global superpowers during the latter half of the 20th century grew tremendously cementing the space market as a staple of government spending for years to come. What was once a Space Race is now a space economy.
The role of government agencies and private companies
In the past, government spending has been the primary source of funding for space missions. However, during the 21st century, especially in recent years, the emergence of private companies into the space economy has changed the landscape for what the future could look like. In 2021, over $10 billion was invested by the private sector in space-related companies. As a result of the development of companies such as SpaceX and Blue Origin, the possibilities for the space economy have inflated – commercial space travel has transitioned from science fiction to reality.
The question over whether private investment in the space economy has been beneficial is easily answered – costs have reduced and competition has increased leading to greater innovation in services and tech. Joe Landon, Vice President of Advanced Programs Development at Lockheed Martin says, “NASA or another agency would not need its own communications link, power, or transportation; it could instead buy those as a service.” With the introduction of commercial players in the market, governments can outsource the development of technology and other services. This allows agencies like NASA to be more cost-effective and concentrate on projects and services it is best suited for. Consequently, start-ups face a lower barrier to entry only accelerating the rate at which the space economy can grow.
As private companies in the space industry have developed, so have the services on oer – commercial space flights are no longer a dream. In 2012, SpaceX became the first company to send a commercial vehicle to the International Space Station (ISS) changing spaceflight forever and opening up the opportunity for even more milestones during the 2010’s. SpaceX are spearheading the introduction of commercial flights to space for tourism. In 2021, SpaceX launched its first all-civilian spaceflight where a crew of four spent three days in orbit without a professional astronaut.9 Moreover, over the last decade, Elon Musk’s business have developed its own rockets, helped NASA by servicing the ISS and made it’s rockets reusable significantly reducing launch and manufacturing costs.10 Figure 2 demonstrates the advantage of private companies entering the market – the SpaceX Dragon 2 is a c.86% price reduction for NASA in comparison to the Apollo spacecraft that carried Armstrong and co to the moon. With costs decreasing and more firms entering the market, government agencies are no longer the only way to enter space. Musk’s SpaceX doesn’t stand alone in the market. Fellow billionaires Jeff Bezos and Richard Branson have their own space ventures with Blue Origin and Virgin Galactic, respectively – both of which made their first tourist spaceflights in 2021 too.
Despite the multitude of benefits resulting from the rise in private investment there are some challenges that have materialised over the past 20 years including outdated regulations and accidents. Regulations were mainly written with national governments and agencies in mind, not private companies – the Outer Space Treaty (1967) was created during the ‘Space Race’, a very different market landscape, and omits regulations on newer developments created by the introduction of private companies such as civilian spaceflights. Unfortunately, the space market is dangerous – with increased missions and the start of civilian flights there is a greater risk to human life. Not only this, but new companies entering the market face a challenge in avoiding obstacles such as rocket failures and timelines taking too long. Despite these current challenges, the future of the space economy still has a promising future if regulations begin to adapt and new entrants overcome the timeline pressure.
Private companies have laid their stamp on the space market; the future of space travel and manufacturing has changed for good. Companies like SpaceX are creating the path for the crowd to follow and with the combination of government funding and private investment the value of the space economy is going to continue to grow at a significant rate.
Space tourism and ‘space for space’ services
Space tourism includes commercial spaceflights but also encompasses all commercial activity in space, for example, stays in space stations. ‘Space for space’ services refer to value being created and exchanged in space, for space – instead of the historical space economy which has seen all the value being exchanged on Earth. A new commercial landscape awaits space across the next decade.
Sub-orbital space tourism refers to a flight to space that doesn’t complete a full-orbit of Earth; Figure 3 shows that the value of sub-orbital space tourism worldwide is expected to grow by c.782% between 2021 and 2031. The pioneering private companies are the main driver behind this monumental forecast due to their innovation in reusable spacecrafts while cutting costs. The most common form of sub-orbital travel is via reusable vehicles which have been used to take wealthy individuals to space already with companies like SpaceX. However, another form of space travel, high-altitude balloons, are expected to come into play with Space Perspective’s balloon (Spaceship Neptune) currently in development. With the evolution of commercial sub-orbital spacecrafts, the future of the space tourism market is one of the subindustries driving the c.11.3% CAGR growth between 2023-2030 for the ‘reach’ segment of the global space economy.
The space economy has undergone constant change throughout history and the next 15 years will be no different. Since the start of the ‘Space Race’ the primary motive for investment has been to launch satellites for communication and other purposes, which is valuable on Earth. However, in years to come spending on services that are valuable in space is estimated to increase. Joe Landon of Lockheed Martin gives an example that refuelling spacecrafts in space between two spacecrafts either in-orbit or even on the Moon, is a possibility over the next decade. As well as this, Peter Platzer, CEO of Spire, believes that between now and 2035 there will be commercially owned and operated structures for both research and tourism in space. Throughout the article we have referenced the space economy on Earth and the bright future it holds, but by 2035 it is possible there will be an economy of its own in space where value is created and exchanged for space.
Space mining and manufacturing are subindustries within space that are expected to mature over the next decade. The process of extracting valuable minerals from asteroids, the Moon and other planets has faced challenges in ensuring profitability due to the high costs of travelling to space. However, with the space economy developing and cost per launch falling, the outlook of the asteroid mining industry is positive – market reports predict growth at c.15-25% CAGR over the next decade. Such an opportunity is attracting many new start-ups into the market; AstroForge, established in 2022, wants to be the first commercial company to mine an asteroid and transport the materials back to Earth. Space mining offers a chance to reach new potential in resource collection and could even aid long-term space exploration.
Like mining, space manufacturing (using the unique conditions of space to produce goods that are difficult to create on Earth) is another subindustry propelling the space economy forward. Market reports are suggesting growth at c.15-20% until the 2030s with many companies intrigued by the possibilities of manufacturing in the vacuum of space – an environment of microgravity. A variety of industries predict that manufacturing in space could help them develop new products, improve current products (microgravity can help produce goods with superior characteristics) and decrease production timelines. Moreover, the pharmaceutical industry spend c.$280 billion on R&D each year and space organisations in manufacturing have an opportunity to obtain a fraction of this spending if they can innovate and decrease timelines. All parties involved can benefit from a collaborative future to create superior products and support a sustainable space economy.
The satellite industry
While there are emerging components of the space market, the satellite industry has been around since the ‘Space Race’ in the 20th century. The satellite industry has come a long way since Sputnik I and is set for growth at the same trajectory as the rest of the market. Furthermore, Figure 4 shows that the number of active satellites orbiting Earth reached c.6.9k in 2022 – a considerable increase from the start of the century, c.770.
The main drivers behind the continued growth in the satellite industry have already been referred to throughout: technological advancements and industry commercialization. These drivers come hand in hand – the innovations in the size, propulsion and electronics of satellites stem from private companies and their lower cost production processes. Private companies aren’t the only ones investing in the satellite industry though as government agencies like NASA continue to grow their satellite programs for defence and communication during a volatile political landscape. Overall, the demand for satellite-based services has been rising since their inception. The need for communication, navigation and research is expected to continue growing due to technological advancements and the ever-increasing need for global connectivity.
The Starlink project, operated by Starlink Services (owned by SpaceX), is the first and largest satellite constellation in low earth orbit providing broadband internet to people all over the world. With c.6,000 satellites, over half of the active satellites currently in Earth’s orbit are a part of Elon Musk’s internet Starlink project. In 2019, the first Starlink satellites were launched and the company has contributed to the sharp increase (shown in Figure 4) in active satellites ever since. Private companies have integrated into the satellite industry just as they have in the other segments of the space economy. Despite Starlink and others involvement in the growing market size of the satellite industry, there is reason for backlash against the excessive launch of satellites. In particular, astronomers have hit back at Starlink due to the constellation impeding optical and radio astronomical observations; others have criticized the overcrowding of space. The Starlink constellation is certainly an innovative milestone for satellites in providing high-speed internet across the globe. Despite this, Musk has work on his hands to prevent the downsides and backlash of his global internet venture.
Space debris is a major challenge faced by the satellite industry. With the growth of satellites in orbit and spacecrafts entering space, the risk of collisions and space debris is at a high and only looks to be increasing. The number of pieces of debris (which can be large pieces of metal, smaller objects, or particles like paint flecks) in space has increased from c.12k in 2000, to c.27k in 2021. Some of the dangers of space debris include a threat to human safety due to collisions, and increased mission costs in order to avoid debris. Space is getting crowded and more mitigation measures are required. Government agencies now require disposal plans with constellation license applications, and actively removing debris from space will be more common over the next decade as missions and spacecrafts develop.
The satellite industry has been growing at a significant rate since 2000 and is forecast to continue expanding with demand for satellite-based services not going away any time soon. Companies such as Starlink have shown the sizeable influence the private sector has had on the industry in launching a great number of smaller satellites into Earth’s orbit. Growth in the industry does face the obstacle of a congested atmosphere. However, as regulations catch up with companies launching satellites and innovation introduces new technologies such as sensors, the satellite industry is expected to continue on an upward trend.
Conclusion
The space economy is one of the largest growing global markets and is set to remain that way over the next decade. Growth rate in the industry has been steadily increasing since the conclusion of the ‘Space Race’ but has spiked in recent years. Since the turn of the century, private companies have made a name for themselves with an increasingly greater share of the market. Governments and agencies have continued to play a considerable role in propelling the industry forward but the commercialization and innovation brought about by the private sector has been central to the rapid growth.
The emergence of space tourism has added to the development of the market; other subindustries like space mining and manufacturing are expected to evolve and contribute to the vast $1.8bn forecast. Satellites began the ‘Space Race’ and are still a key segment of the space economy. The number of satellites launched over the next decade will be remarkably greater than in the last 67 years altogether. Infant markets alongside the sharp upturn in the satellite industry have created challenges for the space industry now and for years to come.
A major challenge facing the space economy is an overcrowded atmosphere. The rise in satellite and spacecraft launches has resulted in an increasing amount of orbital debris and in turn a greater risk of collisions. Alongside collision risks are regulatory issues; the industry is constantly evolving and governments need to keep up with the ever-changing landscape to maintain private investment and prevent hostile behaviour. Additionally, funding for smaller and new companies in the industry is still an issue as developing and maintaining space technology and services is expensive.
Nonetheless, the space economy is maturing and solutions will emerge. Growth over the next ten years is undoubtable, and the challenges mentioned can be resolved with international cooperation and trust in the private sector to continue reducing costs for all players. The future of the space economy is bright.
Full Read:
Click / tap below to download, read and use Jack Giddy's article ‘The Future of the Space Economy’ in full now.
Kingsgate is a professional services firm committed to the growth and transformation of your organization. We are dedicated to helping you unlock enduring value, even in volatile seasons, and bring transformation that lasts.
To learn more about our Transaction Advisory and Growth Advisory consulting services, then please complete the Contact Us form.
See other articles from Kingsgate:
The Future of AI & Work - Graeme Leach
The Future of Cyber Security - Rhys Gillespie
The Future of the UK Commercial Property Market - Jonathan Gibson
Comentarios