Northern Sky Research

Satellite Servicing Back on the Launchpad

May 23rd, 2016 by Carolyn Belle   More from this Analyst | Profile

In the space industry, there exists an inclination to recycle castoff ideas, apply new technology and concepts of operations (CONOPS), and seek a profitable venture. After LEO mega constellations and reusable launch vehicles have found a second and third life, satellite servicing may be next thanks to new commercial efforts. In today’s environment of tight government budgets and heightened pressure on commercial operators to maintain bottom line amidst falling capacity prices, the prospect of optimizing use of satellites already in-orbit means that, though difficult, there exists an opportunity for the right satellite servicing venture to find a foothold in the market.  

Earlier this year, both Effective Space Solutions and Orbital ATK announced that customers had been found for their life extension vehicles, expected to lift-off in 2018. MDA continues to pursue refueling capabilities, as do NASA and DARPA. Beyond life extension via either tug-like spacecraft or refueling, projects under development also endeavor to provide repair services (freeing maldeployed antennas, solar panels, etc.). Players such as SES are looking to a future of in-orbit alterations, installing new payload modules on orbiting satellites whose markets have evolved beyond the original mission design.

Yet until capabilities and especially costs are proven, identifying the precise market for these efforts remains speculative. NSR’s Satellite Manufacturing and Launch Services, 6th Edition found that around 67% of today’s GEO communications satellites are slated for replacement in the next decade. This generates an addressable market of ~250 satellites for life extension by 2025, a similar number of  candidates for on-orbit assembly, and more than 600 for satellite repair or alteration.

 

But how many in this addressable market are real prospects for satellite servicing?

Life extension, whether via refueling or a tug-like spacecraft, is only warranted if the incremental revenue generated through another year of operations exceeds both the servicing cost and the opportunity cost of launching a new, more capable replacement satellite that would facilitate revenue growth. For many operators, CAPEX and cost of capital are factors as well, improving the life extension value proposition in cases of high-debt or pressure from investors to reduce spending (e.g. Intelsat’s contract with Orbital ATK). Nonetheless, in a market that is impacted by the onslaught of HTS capacity, new use of Ka-band, and evolving end-user profiles, older satellites with fixed capabilities very often might not justify the trade-offs.

For operators whose projects have fallen behind schedule, those considering new markets, or start-ups eager to prove a business case, life extension might be an interesting prospect as a means of relocating and providing station-keeping for an aging or end-of-life satellite in a new orbital slot. Given the rate of project delays in recent years and busy schedules of the main GTO launchers, this means of slot preservation will be a valuable service but with an unpredictable demand.

Turning to the second two use cases, today’s near end-of-life satellites are primarily equipped with traditional C- and Ku-band transponders with fixed beam designs that limits their utility as fair proxies of new market prospects. Moreover, the timeline is long: even if a mere year of operations in the new slot is sufficient to prove the business case for procuring a new satellite, a 2-3 year manufacturing and launch period thereafter means that the life extension services will be required for 3-4 years – a timeline that is no longer the low cost, low risk greenfield market exploration that has been proposed.

Satellite repair or alteration represents the most opportunistic application for satellite servicing in the near term, being contingent on a repairable component breaking on a servicable and otherwise profitable satellite. For satellites with maldeployed antennas or solar arrays at beginning of life, the value proposition is strong, but this fades with satellite age and as those components requiring servicing are more complex and/or inside the satellite. However, as tomorrow’s satellites are designed with modularity and servicing in mind, common ports and docking mechanisms will factilitate a future market for these services.

Bottom Line

Satellite servicing projects under development are aimed to leverage the growing operator focus on efficient use of assets into a new market opportunity. Looking foward, when satellite designs include more flexibility to adapt to changing markets and forethought for servicing potential, satellite servicing could represent an expanded and stable market opportunity. For now, it is an opportunistic market limited to the summation of demand from diverse applications and unique use cases. For the handful of servicing vehicles that are slated to be in orbit before the end of the decade, this could be sufficient to demonstrate the capabilities and expand the market. At the right price-to-capability balance, this longstanding idea could transition to a profitable commercial market, and satellite servicing companies are moving towards the launchpad, aiming to grasp the opportunity.