The space economy: ready for lift-off

January 2022  |  FEATURE | SECTOR ANALYSIS

Financier Worldwide Magazine

January 2022 Issue

The commercialisation of space is upon us. As the world’s fascination with space spurs increasing

investment and drives activity in launches and satellites sent into orbit, the space economy is undeniably booming and ushering in a ‘NewSpace’ revolution.

Defined by the Organisation for Economic Co-operation and Development (OECD) as “the full range of activities and the use of resources that create value and benefits to human beings in the course of exploring, researching, understanding, managing and utilising space”, the space economy is forecast to become a trillion-dollar industry by 2040.

According to the Space Foundation’s ‘The Space Report 2021 36th Annual Space Symposium Special Edition’, the global space economy reached $447bn in 2020 (176 percent greater than the Foundation’s first economic analysis in 2005), with nearly 80 percent of this total commercial revenues.

The Space Report also found that: (i) infrastructure and support industries grew the most, by 16.4 percent, surpassing $137bn; (ii) products and services grew 1.2 percent, accounting for over 60 percent of commercial space; and (iii) more than 1100 small satellites were launched in 2020 – 92 percent of all spacecraft deployed.

Also helping to build a global space ecosystem is the Space Economy Initiative, a recently launched (and the first of its kind) United Nations (UN) platform under the UN Office of Outer Space Affairs (UNOOSA) – tasked with bringing emerging and non-space faring countries together to strengthen their space economies.

A capacity-building service, the key objectives of the initiative are the following. First, increase global awareness and understanding of how the space sector’s growth can reinforce socioeconomic development, in line with the 2030 Agenda for Sustainable Development. Second, support countries to scale up this growth to deliver strong, responsible and sustainable national space economies. Finally, enhance cooperation across the global space sector, including public and private stakeholders, to foster inclusive and sustainable growth of the global space economy.

“A combination of improving technical capabilities – including cheaper, better and smaller satellites, as well as falling launch costs – means that the cost of a space mission has fallen significantly in recent years,” says Will Lecky, co-founder of know.space. “This has opened up new possibilities for products and services, which in turn has driven a huge increase in investment in the sector as space services become ever more integrated in our day-to-day lives.

“Satellite broadband is a good example,” he continues. “The mega-constellations we are seeing emerge today simply would not have been possible or profitable before now. People often get distracted by the ‘space’ angle, but investment fundamentals are the same as in any industry, with it being a question of whether the numbers add up and whether the potential reward makes the cost and risks worthwhile. The NewSpace revolution has often changed this balance.”

Sustainability and self-sufficiency

As countries across the globe focus on growing their space economies and investing more in the

space sector, the need for a well-established national space strategy and a clear roadmap to support its implementation over the long term is vital if a prosperous space economy is to be achieved.

“When we talk about the space economy, we are talking about a hugely diverse range of activities,” says Mr Lecky. “Capital flows and clear strategies are always important, though self-sufficiency for a profit-driven satellite communications mission is a different question to sustainability for a space science or exploration mission.

“The NewSpace revolution has led to the emergence of business models that are typically less reliant on government support, although collaborative working between the public and private sectors is still often critical,” he continues. “Satellites provide data, and the bulk of the space economy is focused on using this data for the provision of productivity – and welfare-enhancing solutions on Earth. The sustainability of the space economy therefore also depends on the sustainability of a huge range of different products and services.”

Open for business

With initiatives such as UNOOSA leveraging in-house expertise and peer-to-peer exchange with established space-faring nations to share insights, case studies and good practices on how to grow strong, dynamic and sustainable space economies, space appears to be very much open for business and poised to become the next trillion-dollar industry.

Toward that end, ‘The Space Report 2021 Q3 Edition’ reveals that the third quarter of 2021 saw $9.8bn investment in the space sector, with equity financing activity posting a near-record high.

“Space has been open for business for decades, though as the mega-trends of better technology and falling costs continue to play out, the longer-term story will be one of continued growth,” forecasts Mr Lecky. “It will not always be a smooth journey though, and we do see signs of excessive hype in some areas.

“While most near-term growth will be driven by already-established markets, there are also several markets currently in their infancy which we expect to grow, such as quantum communications, in-orbit servicing, in-space manufacturing and – as we look to the longer term – asteroid mining and space resource utilisation,” he concludes. “Although there are risks, particularly if the growing challenge of space debris is not addressed, the space economy becoming a trillion-dollar industry is likely to be a matter of when, rather than if.”

© Financier Worldwide

BY

Fraser Tennant