Connecting to Grow the Space Economy

Transcription

1 AIAA and Aviation Week Space Commercialization Executive Summit Connecting to Grow the Space Economy Produced by Image Credit: NASA

2 AIAA and Aviation Week Space Commercialization Executive Summit CONNECTING TO GROW THE SPACE ECONOMY The Space Commercialization Executive Summit was developed to provide a forum for key leaders and stakeholders across the space industry to broadly identify the opportunities and challenges of space commercialization. The findings enclosed within are intended as a starting point for discussions on what is valued by the stakeholder community, and further review is necessary to outline more actionable steps as we move forward in these efforts. AIAA and Aviation Week provide this Informational Paper to create awareness and serve as a stimulant for discussion. The views, opinions, and recommendations expressed in this document reflect the consensus of the Summit participants and do not necessarily reflect the official policy or position of any individual participant, government agency, company, AIAA, or Aviation Week.

3 Executive Summary After nearly 60 years of government investment and activities in space, we have reached the point where the private sector, leveraging the accumulated knowledge and accelerating advancement of technology, has become interested in and motivated to develop economic activity in low Earth orbit (LEO). Even those with only a casual interest in space travel and exploration recognize the changes and evolution in the past decade. Sandra Magnus, Executive Director, American Institute of Aeronautics and Astronautics May 27, 2016, Aviation Week & Space Technology Connecting to Grow the Space Economy For many decades, the space economy was largely dominated by government activity (with some private sector support) and was composed of more traditional market segments, such as satellites, launch providers, and human spaceflight. Over time, however, it has evolved into a complex ecosystem of multiple actors, high tech innovation, and dynamic growth, spanning all aspects of the public and private sectors. Today, the global space industry includes many existing and emerging market segments and is estimated to be approximately $324 billion (1), with the U.S. space industry estimated at approximately $125 billion in 2014 (2). Investment in space ventures has attracted over $13.3 billion since 2000 (3) and more venture capital has been invested ($1.8 billion) in 2015 alone than in the prior 15 years combined (4). While certain market segments are already highly commercialized (e.g., satellite operations and associated launch providers), the key to harnessing the full potential of commercial space lies in understanding how emerging market segments (e.g., small satellites and associated launch providers, near space and suborbital human spaceflight) can become sustainable over time. Today, the public and private sector are working toward realizing this goal. Though resource constraints in both sectors have limited progress to this end, public-private partnerships have played an integral role in facilitating the commercialization process in the space industry. The convergence of many applications in space increases prospects for expanding the space economy, and more can be done to understand the non-traditional challenges that can be addressed with space-based solutions and connect these communities to encourage collaboration. On September 13, 2016, AIAA and Aviation Week Network convened the first Space Commercialization Executive Summit in Long Beach, California, where a group of key industry, government, and academic leaders were asked: how can we foster a viable and sustainable commercial space industry to extend economic activity to low Earth orbit and beyond? The following key themes emerged in the recommendations presented by the Summit participants: Political, legal, and regulatory stability is key to business stability, and federal policy can provide guidance to concentrate efforts across all sectors. Government can take specific and immediate steps to encourage more favorable market conditions, including economic incentives. The government is a potential customer, but cannot be the sole customer. Leverage all available resources, including industry trade associations, in policymaking processes. 1. FAA: The Annual Compendium of Commercial Space Transportation: 2016 (January 2016) page 1 2. FAA: The Annual Compendium of Commercial Space Transportation: 2016 (January 2016) page 9 3. The Tauri Group: Start-Up Space: Rising Investment in Commercial Space Ventures (January 2016) page iii 4. The Tauri Group: Start-Up Space: Rising Investment in Commercial Space Ventures (January 2016) page iii

4 Introduction The space economy has evolved into a complex ecosystem of multiple actors, high tech innovation, and dynamic growth, spanning all aspects of the public and private sectors. Today, the global space industry includes many existing and emerging market segments and is estimated to be approximately $324 billion (1), with the U.S. space industry estimated at approximately $125 billion in 2014 (2). Investment in space ventures has attracted over $13.3 billion since 2000 (3) and more venture capital has been invested ($1.8 billion) in 2015 alone than in the prior 15 years combined (4). The key indicator of the successful advent of a true commercial market will be the creation of a complex network of transactions [in space] (5). Today, the public and private sector are working toward realizing this goal. Though resource constraints in both sectors have limited progress to this end, public-private partnerships have played an integral role in facilitating the commercialization process in the space industry. Historically, these opportunities for collaboration have enabled both sectors to identify how best to leverage existing resources efficiently and effectively (e.g., capital, technology, workforce, etc.) toward advancing the frontiers of technology development and exploration. As we work to create more sustainable market segments in space, public-private partnerships continue to present a viable mechanism for developing the technology and infrastructure to support these endeavors. NASA, for example, in the past decade has successfully instituted the Commercial Cargo and Crew Programs to leverage private sector resources to develop a domestic capability for delivering cargo (and eventually humans) to the International Space Station (ISS). This program has enabled emerging private sector actors to develop the hardware and expertise necessary to expand their available services, with the ultimate goal being the creation of a sequenced approach to commercializing low-earth-orbit (LEO) operations and eventually beyond-earth-orbit (BEO) exploration. In addition, enabling the creation and sustainable operations of commercial alternatives to traditionally public sector capabilities allows government organizations to focus their attention on BEO exploration research and technology development. In order to promote more sustainable market segments, it is imperative to effectively articulate the benefits of spacebased applications and the LEO environment to non-traditional and non-aerospace sectors. To this end, the U.S. government designated the ISS as a National Laboratory and instituted the Center for the Advancement of Science in Space (CASIS) to maximize the use of the ISS as an unparalleled platform for innovation (6). As a tool to help identify non-traditional uses of the LEO environment, CASIS is one mechanism to leverage existing capabilities and investments by exposing non-aerospace businesses to the advantages of LEO research, development testing, and manufacturing benefits. The convergence of many applications in space increases prospects for expanding the space economy, and more can be done to understand the non-traditional challenges that can be addressed with space-based solutions, and connect these communities to encourage collaboration. Thus, the fundamental question asked of Summit participants was: How can we foster a viable and sustainable commercial space industry to extend economic activity to low Earth orbit and beyond? 1. FAA: The Annual Compendium of Commercial Space Transportation: 2016 (January 2016) page 1 2. FAA: The Annual Compendium of Commercial Space Transportation: 2016 (January 2016) page 9 3. The Tauri Group: Start-Up Space: Rising Investment in Commercial Space Ventures (January 2016) page iii 4. The Tauri Group: Start-Up Space: Rising Investment in Commercial Space Ventures (January 2016) page iii 5. Mary Lynne Dittmar, Getting the rules right: LEO as an economic development region, The Space Review, September 15, 2014, article/2600/1 6. CASIS:

5 Summit Details Produced and hosted by the American Institute of Aeronautics and Astronautics (AIAA) and Aviation Week Network, the Space Commercialization Executive Summit sought to discuss the formation of the space economy on both a national and global scale by identifying mutual interests, opportunities for collaboration, and challenges to commercializing space. The inaugural theme centered on connecting existing and nascent space actors, government agencies, and industry sectors to promote collaboration and increase visibility and commercial opportunities in the private space sector. The Summit brought together more than 60 senior executives, influencers, and stakeholders involved in the commercial space sector, including industry, space commerce, research and development, academia, and government. The Steering Committee comprised space industry executives and government, and was chaired by Michael Lopez-Alegria. Roundtable participants were divided into working groups and assigned to one of five discussion topics. The five topics were: Evolving Space Infrastructure Applications Non-Technology Enablers Business Imperatives Creative Disruption for Innovation Where should we go and what should we do there? How do we inspire/motivate the next generation with what we do today? What are the barriers to economic growth in space? How do we overcome risk and create opportunities for applications to emerge? How do we define/improve the value proposition of space? How can we provide the certainty needed to enhance access to financing and grow a sense of cooperative market development with government? What barriers exist to access private equity? How can industry access government assets/sources? What are potential solutions for aligning agency missions with innovation and equal funding opportunities for space development? Participants also were asked to discuss more foundational questions on their respective discussion topic, including: What new or non-traditional space products and services is industry planning to offer that can be addressed? Are there things that the government can or should do to enable industry to be successful in offering those products and services? Are there activities or mission areas where a collaborative effort would be beneficial? What are the existing issues and challenges to the commercialization of space? This Informational Paper, as the ultimate product of this Summit, outlines areas of concern and focus, as raised by participating space leaders and stakeholders.

6 Findings Summit participants acknowledged that growing a space economy requires capabilities, low-cost access to space, industry standardization, the ability to understand risk and rate of adjustment, and sustainable markets for products and services. These requirements present an opportunity for reassessment of U.S. and global leadership in space. Through their discussions, the Summit participants provided a range of recommendations that provide guidance for government, private, and nonprofit sectors to facilitate the space commercialization process more effectively. Several key themes emerged in the recommendations presented by the Summit participants: Political, legal, and regulatory stability is key to business stability. In recent years, the commercial space sector has seen expansion as entrepreneurs have been developing companies focused on space-based applications (e.g., Made in Space, Planet), but to develop a thriving market in space (whether in LEO or cislunar), a broader cross-section of commercially-viable activities must be developed and sustained. The Commercial Space Launch Competitiveness Act (CSLCA) of 2015 has addressed aspects of legal and regulatory stability, but Summit participants emphasized that stability in government policies, whether at the federal or state and local levels, is necessary to create a favorable environment to facilitate this growth. Federal policy can provide guidance to concentrate efforts across all sectors. Pro-commercial space sector growth policies should include a focus on economic development. Conditions must be favorable for a viable market to emerge and thrive, but part of this equation is identifying possible economic development regions to concentrate collective efforts. LEO provides a natural proving ground for this type of concentrated effort, but it may also be helpful to identify a destination beyond Earth orbit, so that activities in LEO can be used to design, build, and test technologies that are crucial to BEO exploration. Not only could this allow for economies of scale, but it could also provide opportunities for commercial entities to work together for a multitude of purposes (medical, science, exploration, tourism, etc.). In addition, as commercial space activities evolve, the roles of associated stakeholders have likewise evolved. Government and private sector actors have distinct responsibilities and objectives, and policy should reflect an understanding of these distinctions. As some technologies are more effectively and efficiently delivered by commercial KEY POINTS Political, legal, and regulatory stability is key to business stability. Federal policy can provide guidance to concentrate efforts across all sectors. Government can take specific and immediate steps to encourage more favorable market conditions. The government is a potential customer, but cannot be the sole customer. Economic incentives should be considered to attract investment. Leverage all available resources, including industry trade associations, in policymaking processes. Developing an integrated value proposition is crucial to communicating the benefits and revenue potential of space-based activities.

7 Findings sources, we may need to redefine what inherently governmental actually means. Just as policy should be developed to help a growing commercial space sector thrive, strategic approaches should be taken to ensure that policies do not encourage competition between industry and government as we transition to an environment where there is more of a cooperative architecture with reliability that meets government cost parameters. Leveraging commercial assets and capabilities to further government goals can be one way of addressing this concern, but policies must coalesce around an agreed-upon vision that is not at risk of changing with political cycles. Government can take specific and immediate steps to encourage more favorable market conditions. Government institutions that make investment decisions in technology and infrastructure (e.g., NASA, DARPA, etc.) should incorporate best business practices into their decision-making processes. To this end, government officials who make investment decisions for their respective agencies should be educated on the benefit of incorporating due diligence and accountability practices into reviews of the responses received to a Request For Proposal (RFP). Moreover, these agencies can also set up processes in soliciting and reviewing RFPs that enable them to be nimble and pivot when necessary. In coming years, as new acquisition models are investigated and adopted across the public sector, government agencies should investigate the viability of those that incorporate equitable risk-sharing methodologies in structuring public/private partnerships. Strategically incorporating risk mitigation models into future partnerships can ensure that risk is equitably distributed amongst stakeholders and no one party jeopardizes its business or operations. Likewise, as government organizations embark on program planning, they may benefit from modifying the current U.S. government competitive acquisitions process to identify and communicate program and project needs in a way that commercial companies are able to demonstrate their abilities to provide commercial solutions. Doing so could enable commercial space entities in the private sector to develop new and enhance existing capabilities to directly address U.S. government needs, thereby potentially mitigating risks inherent in the technology development process. The government is a potential customer, but cannot be the sole customer. The government contributes to a significant portion of the current commercial demand for goods and services in LEO, but to create a sustainable market in space, there must be a focus on broadening the customer base for such demand. By strategically utilizing existing capabilities and investments, and encouraging the growth of new ones, the government can enable consistent growth of the commercial space economy. The government acquisitions process is clearly evolving, as we have seen government entities purchasing goods and services more consistently instead of developing hardware or highly specified systems themselves. It should be noted, however, that while there may be solutions to mixed opportunities and challenges with existing acquisitions mechanisms, such as Special Service Agreements and Other Transaction Agreements, establishing clear ownership of intellectual property rights still presents a major obstacle to commercial contracts. As mentioned previously, the Commercial Cargo and Crew Programs are examples of such a leveraging of existing infrastructure, while encouraging the growth of new capabilities. Other NASA programs, such as NEXTStep and a multitude of RFIs focused on the utilization of ISS resources to advance economic development in LEO, are other mechanisms that are being tested to enable a more sustainable commercialization of space. These mechanisms are being tested with the idea that the purchases are focused on meeting government mission goals, but can encourage the magnitude of the investment to grow. It should be noted that no one acquisitions model can address all needs. Thus, when comparing existing models, care must be taken in understanding the unique situational factors that made each model effective and any observations and lessons learned applied appropriately.

8 Findings Along with leveraging existing resources to develop new capabilities, the government can also encourage and collaborate on the development of standards that can eventually provide opportunities for cost savings and increased levels of productivity. The CSLCA addressed the need for the development of industry consensus standards for commercial human spaceflight, but the industry recognizes that the time required to develop a comprehensive set of these standards is still extensive. Moreover, development of standards for non-human spaceflight can also benefit the commercial space sector as a whole. Ensuring the success of these efforts can slowly lead to the growth of demand necessary to realize a sustainable space economy. Ultimately, for these efforts to be successful future models, there must be demand created beyond that provided by government. Economic incentives should be considered to attract investment. Economic tools, such as tax incentives and subsidies, for example, can be used successfully at the state and local levels to attract private sector investments in commercial space. Incentives can provide the impetus to deep dive into potential areas of development/expansion. These could include: 1) providing tax-free zones for activity and purchasing commercial research, 2) creating opportunities to bring together innovators and customers, 3) establishing mechanisms for raising and distributing prize or venture capital funding, 4) promoting performance-based contracts, or 5) identifying existing and future infrastructure that can be leveraged to generate revenue. These can be instituted on federal, state, or local levels, or some combination of the three. A prime example of the strategic use of economic incentives can be seen in Texas, where the Texas Enterprise Fund and the Texas Emerging Technology Fund, both used to invest in the Texas economy via technology and workforce investments, were used to encourage SpaceX and the University of Texas System to build launch infrastructure and research and development facilities in south Texas (1). Leverage all available resources, including industry trade associations, in policymaking processes. Summit participants felt strongly that all members of the space community should be engaged in the policymaking process, both domestically and internationally. To this end, in recent years the U.S. Department of State s Office of Space and Advanced Technology, which leads the U.S. delegation to the United Nations Committee on the Peaceful Uses of Outer Space (COPUOS), has provided an opportunity for the private, academic, and nonprofit sectors to consistently engage in the international policymaking process. By providing subject-matter experts across these sectors a means to contribute to the policymaking process, the U.S. delegation is able to understand and address the priorities and concerns of the U.S. space community when negotiating key policies, such as in the recent efforts to adopt guidelines for the long-term sustainability of outer space activities. Similar models for collaboration across all sectors of the space community will be crucial to develop integrated and relevant messages to address a broad cross-section of concerns and priorities. Developing an integrated value proposition is crucial to communicating the benefits and revenue potential of space-based activities. Since the inception of space programs across the world, the space story has continued to evolve. We must strive to paint the narrative strategically by consistently engaging all stakeholders in this evolution. Moreover, it is essential to identify all intended audiences and craft the stories in unique ways that appeal to these audiences. Using new and innovative communications tools, such as social media applications, can help to broaden the reach of messages, but these messages must be developed in a coordinated fashion across all stakeholders to have a larger, cumulative effect. A compelling story alone will not accomplish our intended purposes of increasing interest in commercial space (and thereby increasing commercial interests in space). The narrative must address the financial interests of investors and entrepreneurs; we must address returns on investment and associated time periods, inherent risks and proposed risksharing mechanisms, and revenue growth potential, among other things. The community can work to better understand how relevant and currently established industries tackled similar challenges when they were nascent themselves. 1. TEF/TETF: