Space Economy: The New Frontier for Development

By Simonetta Di Pippo

According to the OECD definition, the space economy is the set of activities and use of space resources that create value and benefits for humanity through the exploration, understanding, management and use of space. The space economy goes far beyond the space sector in a narrow sense, because it extends to the increasingly pervasive and changing impacts of products, services and knowledge derived from space. Based on the most recent estimates, the space economy globally is now worth $469 billion dollars, with double-digit percentage growth forecast for the next decades. But what is most important is that the space economy will provide opportunities for growth for less developed countries as well, contributing to the achievement of the sustainable development goals.These considerations are the starting point for the fascinating journey that fills the pages of this book: space exploration and tourism, asteroid economics, new "Made in Space" products but also space debris wandering in the traffic of increasingly congested orbits. The future is indeed just around the corner: We need to prepare ourselves by equipping our human capital with all the necessary knowledge.

• Language: English
• Publisher: EGEA Spa - Bocconi University Press
• Release date: Feb 12, 2023
• ISBN: 9788823885936

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Acronyms

Written by Simonetta Di Pippo

Planet Earth, 41°53’35.88 N, 12°28’58.67 E

Asteroid 21887 Dipippo – Main Belt

It is difficult to say what is impossible, for the dream of yesterday is the hope of today and the reality of tomorrow.

– Robert H. Goddard

1   Definition and size of the space economy

Space isn’t remote at all. It’s only an hour’s drive away if your car could go straight upwards.

– Fred Hoyle¹

In 2012, the Organization for Economic Cooperation and Development (OECD) defined the space economy as the full range of activities and use of space resources that create value and benefits for humanity in the course of exploring, researching, understanding, managing and utilizing space.² An earlier definition dates back to 2007 when the office of the US space agency (NASA) responsible for strategic communications began using the following definition: The space economy: the set of activities and use of space resources that create and provide value and benefits to humanity in the course of the exploration, understanding, and use of space. The definition introduced by the OECD can be seen as a mere expansion of the concept expressed by NASA a few years earlier, not deviating much from the previous formulation.

However, the OECD goes on to further delineate the contours of the sector: It includes all actors, public and private, engaged in the development, provision, and use of space-related products and services: research and development, construction and use of space infrastructure (ground stations, launch vehicles, satellites), applications derived from space (navigation instruments, satellite phones, meteorological services, etc.), as well as the scientific knowledge that results from these activities. The space economy goes far beyond the space sector in the narrow sense because it extends to the increasingly pervasive and changing impacts (in quantity and quality) of the products, services, and knowledge that result from space.

We should also consider that space activities are divided into upstream (satellites and launchers) and downstream (services and applications derived from space-based data and infrastructures). A further subdivision is extremely relevant to fully understand the extent of the space economy, especially in the medium to long term: space economy-related activities carried out in space to assist exploration and service missions in orbit (space for space), and those that instead use space data and infrastructure to improve the quality of life on Earth (space for Earth).

The current value of the space economy

We have briefly seen how in the context of space activities, the space economy is considered to be very much anchored in telecommunications, satellites and launches, Earth observation and ground equipment, which are precisely the core elements of the space sector in terms of infrastructure and in-orbit assets. In reality, however, the space economy goes far beyond this. In fact, it covers not only the space sector in a strict sense; instead as a broader concept, the space economy includes a range of activities and communities outside this specific sector. Indeed, there are many services, products, and applications in other sectors that benefit from satellite technology such as agriculture, environmental protection, natural resource management, and transportation, just to name a few.

In 2020, the Space Foundation in The Space Report³ cited a value for global space activities of $423.8 billion, up $9 billion from the previous year. In the following Space Report,⁴ published in 2021 and based on 2020 data, the value of the space economy rose to $447 billion, with an increase of 4.4% over the final value in 2019, which was $428 billion. This means there has been a 55% upsurge over the past decade. The most recent available data, thanks once again to The Space Report, indicates a year-end total of $469 billion for 2021, 6.4% higher than 2020. As these figures clearly show, the growth trend is significant.

In any case, it is worth comparing this information with that published by other reputable organizations. The Satellite Industry Association presented a report in 2021 produced by Bryce Space and Technology⁵ that estimated a value to the space economy of $371 billion based on the 2020 figure.

Analyzing instead the 2021 Space Economy Report by Euroconsult,⁶ we find a value of $370 billion. This figure refers to the space market alone, specifically amounting to $337 billion for hardware development (which includes both the government and commercial side) and $33 billion in other expenditures by governments and the public sector in general to conduct relevant activities, such as internal outlays, and research and development. But this number does not include all the ancillary economic activities, which would actually be quite complex to estimate without commonly accepted definitions and models.

From an initial analysis, therefore, it is clear that there is currently no single, unambiguous approach to measuring the value of the space economy. Equally evident is that the value of this sector has escalated considerably over at least the past decade, whichever number one wishes to take as a reference.

Now let’s analyze the Space Foundation’s 2021 report again, with a view to understanding what rate of growth the space economy sector has experienced in recent years, taking 2020 as our reference. As a starting point, we will use the figure provided by the Foundation in 2005,⁷ the very year that their report provided the first estimate of the value of the space economy. Comparing the two numbers respectively from 2005 and 2020, the result is striking: the global space economy, reaching $447 billion in 2020 as we mentioned, has skyrocketed 176%.

Growth projections for the space economy

From Euroconsult’s 2021 Space Economy Report, we can deduce that the space economy is projected to grow 74% by 2030, hitting a value of $642 billion, after declining 4% in 2020 due to the Covid-19 pandemic. In 2021, we noted a 6% uptick over 2020, making the market comparable to values in 2019, before the pandemic crisis. The two mainstays of the space economy are satellite navigation and communications, which account for 50% and 41% respectively, based essentially on business-to-consumer (B2C) applications. Earth observation contributes 5% of the overall value, while satellite navigation has grown from about 37% of total revenues in 2016 to more than 50% in 2021, a rise due specifically to services provided by Global Navigation Satellite Systems (GNSS).

A Bank of America projection would bring the value of the sector to $1.4 trillion in 2030.⁸ This calculation considers an annual growth rate of 10.6%, taking an average value of the last two years as a reference, which would result in 230% growth by 2030. By comparison, at that rate, the space economy would amount to the global value of the tourism economy, which according to Bank of America is about $1.5 trillion. A study published in 2020 by the Institute for Defense Analyses⁹ also reports other projections, such as one presented by UBS of $926 billion by 2040, up to Goldman Sachs’ estimate of several trillion within the same time frame. What is clear therefore is that it depends a great deal on the methodology used, the parameters considered, and whether or not one includes sectors adjacent to the space sector in the estimation. Kevin O’Connell points out that there are hidden values in the space economy and reiterates the need for a common lexicon and valuation parameters.¹⁰

So which sectors will contribute the most to take the space economy from about $450 billion in 2020 to those trillions we mentioned in 2040? One of the areas in the short to medium term destined for strong development is undoubtedly internet access through broadband satellites. In this regard, Morgan Stanley published a report estimating that satellite broadband provision will account for anywhere from 50% possibly up to 70% of the growth of the space economy on a global scale by 2040. This is because launching mega-constellations of satellites will lower the cost of data and service just as demand explodes. The reason here is twofold. On the one hand, mega-constellations for internet access on a global scale will give coverage to regions of the world that are either not served at all or are underserved today. On the other, these satellites will meet the needs of the world of transportation (especially with the emergence of self-driving cars), the Internet of Things (IoT), the surge in the use of artificial intelligence and virtual reality, and the exponential demand for video entertainment.

Access to space is within the grasp of a growing number of actors, which will foster a phenomenon of democratization of space. This thanks to reusable launchers, which further lower access costs, boosting the number of satellites produced and launched.

In the medium to long term, other sectors that are potentially very interesting should be considered in terms of multiplying the value generated by the space economy. For example, the extraction of metals from celestial bodies such as asteroids will bring about a paradigm shift in terms of the value of the space economy, allowing it to reach stratospheric levels. The close link between space and climate change will be another extremely important development path in the sector. The future of the Earth – in this case in the short to medium term – depends on space if we are to save the planet.

Sinead O’Sullivan of Harvard Business School estimates that one dollar spent in the space economy generates about $50 in value.¹¹ Assuming this estimate is correct, if we take $447 billion and multiply it by 50, we get $25 trillion, which is about ten times the value of the economy of the United States of America.Eighty percent of this value comes from the commercial sector. But operators of in-orbit assets need a space environment that is predictable, stable, safe, and sustainable over the long term; otherwise, their business models could be jeopardized by, for example, an in-orbit collision. From most analysts and experts in the field comes the warning not to forget that the long-term sustainability of the space environment is linked to the ability to develop and preserve it in such a way that is sustainable for operators.

The mounting challenge related to the presence of space debris goes hand in hand with the need for space traffic management and coordination, which is critical for the space economy to develop properly. To quote Sinead O’Sullivan, We have no more space in space. So really the question is not whether the space economy will actually reach at least trillions of dollars in value, but more to the point, when this will occur. In other words, whether or not this growth will be as rapid as many of the players in the industry expect, it appears undeniable that, one way or another, a market explosion will happen. Whatever the precise value is now and will be, the impact of all this is absolutely astounding, considering also that the most significant trend is emerging in the private sector.

Satellite telecommunications started one of the first space economy markets. Meanwhile, more recently, year after year, barriers to accessing space have become lower, and the number of private players has multiplied, as have public-private partnerships thanks to new sources of funding. Companies in the field have been able to accelerate the rate of innovation and speed of project implementation while developing new technologies. Satellites are also getting smaller due to the miniaturization of components, which has led to a significant reduction in the cost of access to space. These elements, on the one hand, are crucial to the development of the space sector and on the other, are paving the way for unrestricted exploitation on a global scale.

With lowering barriers to entry, space data and space infrastructure are being used more and more to benefit not only developed economies but also – and more importantly – emerging and developing countries. Reduced access costs have also contributed to an increment in the number of space players, both because more countries have been able to gain access to space and because, thanks to this, they have been able to build their own space economies. As a result, space has to some extent become an indispensable element in their socioeconomic development. When the space age began in 1957 with the first satellite, Sputnik-1 launched by the former Soviet Union, that country and the United States (which followed the USSR in 1958) were the only nations with the ability to access space. In contrast, today more than 80 countries have had at least one satellite in orbit.¹²

Therefore, if we want to measure the value of the space economy, we need to identify solid underlying concepts. We need to determine where the impact of space economy growth begins and where it ends, and this is clearly not an easy task. And we need standardized methodologies so that we can compare the various estimates of the value of the space economy in light of the obvious discrepancies between estimates of both present and future values.

Undoubtedly, government support for the development of long-term programs in the space sector is crucial. But it is also clear that the space economy goes far beyond that, since with its many related activities, it is certainly driving economic growth on a global scale and is capable of accelerating sustainable socioeconomic development. It is equally certain that