13.01.2020 change 13.01.2020

By Combing Romanticism with Pragmatism, Poland Could Benefit from Booming Space Biz Industry

Credit: Fotolia Credit: Fotolia

Dr. Piotr Kaczmarek-Kurczak from the Kozminski University argues that by using the opportunities created by the space sector to participate in the business and technology revolution taking place, Poland could end up a player in the future of space exploration.

Science in Poland: It appears that we should slowly get used to the new breakthrough achievements of companies such as SpaceX and Blue Origin. Are we at the threshold, after which space exploration will be privatised?

Dr. Piotr Kaczmarek-Kurczak, innovation and entrepreneurship expert: The answer to this question is complicated. You can say: yes and no. It all depends on who pays for space activities. At the moment, a special law allows NASA to pay private companies for performing specific congress-approved tasks in space, for example, for delivering cargo to the space station. Of course, many of the technologies developed for NASA are used purely commercially, for example when launching satellites into orbit. That is how SpaceX Falcon rockets are used.

The satellite launch market alone is indeed quite large, its annual value estimated at approx. $9 billion. However, we are not yet at the stage where private companies will undertake serious extra-orbital space projects, covering the cost entirely out of their own pockets. Today, taxpayers pay for such activities through space agencies and government grants. No such activity, which would be fully implemented by private entities, has been carried out or even planned yet. Not even the construction of the Bigelow Aerospace inflatable orbital station (based on Transhab technology bought from NASA) or the Moon flight announced by SpaceX.

SiP: So what can we expect?

PK-K: If this system persists, if the US Congress agrees to delegate further responsibilities to private companies and expand funding, we will see a growing number of companies performing these types of tasks both in orbit and in deep space. However, if the model is found to be wrong and its approval in Congress is withdrawn, these companies will have serious financial problems and may not even be able to survive. They are mostly companies that do not have a steady flow of money.

The funds that billionaires spend on space activities are much smaller than those available to NASA. For example, SpaceX is worth $ 30.5 billion. For comparison - NASA's budget is roughly $ 25 billion. In addition, a large portion of SpaceX's revenue comes from NASA and the US government. Therefore, the valuation of SpaceX is very dependent on whether the company is able to acquire government contracts for launching satellites.

Hence the argument about the Department of Defense's commission to launch military satellites after winning the contract by SpaceX. Jeff Bezos' (founder of Amazon) Blue Origin protested, accusing SpaceX of building a monopoly. Currently, the only private ventures unrelated to government activities that can bring real financial profits are the projects SpaceX, Google and Facebook are working on. These companies want to build a network of satellites that will provide Internet globally, regardless of existing infrastructure in the area. Thanks to this, they will be able to reach potential users around the world with their services, without any political restrictions such as those in China or Russia. This will increase the reach of their services by hundreds of millions of users and will greatly increase their income.

However, flights to the Moon or Mars will not become profitable for a long time. Yes, SpaceX may send some ships and probes to the Moon or even Mars, but these are technology demonstrators to show their potential customers what the company can do. Larger and systematic purchases of various types of space services are still in the hands of politicians.

SiP: But one can get the impression that there is more and more private activity in space.

PK-K: Recently it does look as if humanity’s conquering of space has gone into full swing. But the truth is that there has been no fundamental change. All this is well established historically and largely due to disappointment with the model developed in the 1960s and 1970s. The creation of a budget-funded, non-military space agency bringing together the brightest minds seemed incredibly attractive. There was an opinion that it was the right model for space exploration and actions for the good of humanity.

The problems started when an important change was made during Nixon's presidency. Before that, goals were set and NASA was asked how much money it needed. The agency received funds accordingly. President Nixon introduced a fixed budget and NASA was to set its goals within its limits. In the 1990s, after the Challenger disaster, the public realized that the agency was heavily burdened politically and that spending depended on political factors. A great example were space shuttles, many parts of which were manufactured not where it was most technologically and financially justified, but where the voters voting for specific senators and congressmen providing funding were.

SiP: What was the result?

PK-K: There were people who criticized the system. One of them was Robert Zubrin, author of the famous book 'The Case for Mars' and originator of the Mars Underground movement, later transformed into The Mars Society. In the 1990s, he proposed a change in the method of financing space missions. Zubrin worked for a NASA subcontractor - Martin Marietta - and was well aware of how inefficient a system based on a classic 'cost plus' principle public procurement was.

The traditional system was that NASA would ask subcontractors: "How much will you build this system for us for?" This, in turn, encouraged companies to inflate costs. Political influences and lobbying were also important: if NASA considered valuation too high for its financial capabilities, companies would press senators and congressmen to give NASA more money as needed, provided that the money would be allocated to projects carried out by these companies. The system was very lucrative, but almost all NASA projects went far above the budget and implementation schedules. Quality has also dropped dramatically, resulting in a series of spectacular mishaps: lost space probes, failures and disasters.

Zubrin proposed a system, in which private companies would receive specific rewards for carrying out specific tasks: placing cargo in orbit, bringing cargo from orbit, docking two ships in orbit, etc. Private companies could apply for contracts, but could not exceed their budget. The terms of the bids and the award of the contract were also very strict, transparent and independent of political influence.

After the Columbia disaster in 2003, criticism of NASA grew to such an extent that the agency felt compelled to change the status quo. Zubrin's ideas returned to favour. The shuttle system was abandoned and was expected to be replaced by the new launch system, but its implementation was very uncertain. The only means to bring supplies and services to the International Space Station were Russian rockets Soyuz and Proton, which the United States believed to be significantly overpaid.

In this situation, NASA had nothing to lose. The agency launched the COTS (Commercial Orbital Transport Systems) program, which financed rocket tests of companies such as SpaceX (Falcon rockets and Dragon capsules) and Orbital Science (Antares rockets and Cygnus cargo ships). The strength of the COTS program was revealed: when one of the companies (Rocketplane) proved unable to perform the contract, it was replaced by Orbital Science. On both orders, NASA spent a fraction of its usual costs: the entire program including 20 flights cost only 3 billion dollars, while the estimated cost of one shuttle flight oscillated between 500 million and 1 billion dollars.

But remember that the entire development of both companies was significantly financed by NASA. Hence the harsh comments of the head of NASA after the SpaceX conference, at which Elon Musk's company presented the concept of their Starship. The head of NASA pointed out that SpaceX should focus on NASA's order for the flight of a manned Dragon capsule to the space station rather than working on flights to Mars, for which the Agency did not pay.

SiP: And what is the situation on our continent?

PK-K: European spending on space projects is much smaller than US spending, although the European Union's GDP is roughly similar to that of the United States. The ESA's budget is almost four times smaller than NASA's, in absolute numbers it is probably the second largest space agency in the world in terms of budget.

Europe has moderate faith in the private sector, entrusting the performance of key tasks to companies controlled by the public sector. The key Ariane launch vehicle program is implemented by state-controlled enterprises (France, Germany, and to a lesser extent other member states). Fully private companies perform various auxiliary tasks.

Attitudes towards the private sector are changing, going towards its larger participation in ESA's projects. Europe is eager to take part in the space race and has the conditions to do so. However, no European company is likely to undertake such tasks as SpaceX or Blue Origin.

European companies do not yet have the relevant experience, on the European market it is more difficult to find staff, and there is no adequate capital support from private investors (SpaceX is 48 percent owned by venture capital investment funds). ESA opens the door wide for small and medium-sized enterprises, but there is hardly any chance of establishing such entities as the American space companies.

At the same time, other countries such as Japan, Russia and China implement virtually 100 percent state-controlled programs, so the American COTS program and the American private space sector are a global phenomenon.

SiP: However, European, including Polish companies, are constantly taking part in various ventures, though not as spectacular as high-profile American projects.

PK-K: That is correct. We have a well-functioning space industry also in Poland. Domestic companies such as CreoTech and Astronika manufacture components for satellites and space probes. Poland also has a long tradition of activities in the field of space use, also thanks to the Space Research Centre of the Polish Academy of Sciences operating since the 1970s. Thanks to the participation of the Space Research Centre PAS in space projects, Poland received the first orders for instruments, the engineering and expert staff developed.

SiP: According to the Polish Space Strategy, domestic companies should account for 3 percent of the European market by 2030. Is this an ambitious plan and do you think it is feasible?

PK-K: Unfortunately, the problem with Polish plans and strategies is that it is often not known if they are feasible. Their implementation depends on the political determination. Poland still has a very good labour cost/quality ratio, so with a really big effort achieving the goal can be achieved. However, many plans in our country are discontinued or insufficiently financed.

Polish space companies are young and relatively weak in terms of capitalization. Their capital amounts to several, maybe several dozen million zlotys. This is very little for the space industry, Internet companies in Poland achieve capitalization at a level 2-3 times higher. Without government support and coordination from the appropriate institution, achieving the goal can be very difficult. In addition, the Polish Space Strategy has still not obtained political consensus, which may mean that subsequent governments may not feel obliged to continue it.

SiP: In what areas do we have the best chance?

PK-K: Two things must be distinguished. The first thing is spectacular projects, e.g. missions to distant planets. Polish components were created for their needs as early as the 1980s. But this sector is not particularly economically significant. These are long-term projects and they are rarely organized. A probe flight can take 10 years. It's hard to survive on such orders. On the other hand, participation in such missions strongly raises our competences and gives our companies an appropriate reputation, allowing them to secure more "mundane", but also more lucrative contracts.

In a broader perspective, participation in continuous ESA activities is more important: the production of satellites, creating new types of sensors, antennas, and image processing systems. This is where the real money is. Such orders are an opportunity to develop for the entire spectrum of companies and subcontractors, expand and employ professionals and engineers. They also form strong networks of international connections and cooperation, which are very important in this sector.

As subcontractors, we have many advantages, and our space sector can become a very important part of our economy, driving innovation in other sectors, such as aviation, IT and even agriculture. We can think of Poland's participation in difficult, prestigious missions, and even in manned flights, as a way of advertising our capabilities, but at the same time we must keep in mind what contributes to the continuing, long-term development of our high technology sector.

SiP: So we should focus on pragmatism...

PK-K: The space sector has great power to create romantic visions, stimulate the imagination, attract talent, create a long-term vision. However, in the next few years, the consequences of e.g. the first private flight around the Moon by a billionaire and the construction of a cheap, fast, global, satellite computer network are incomparable. If such ventures as Starlink succeed, the economic, political and social effects will be comparable to the emergence of commercial Internet at the turn of the 21st century.

There will be a huge breakthrough in the field of telecommuting, the range of drone control and their commercial use will increase, access to satellite monitoring in real time will increase, the globalisation of digital goods will accelerate, the market of streaming services will grow rapidly, etc. IT companies will gain new opportunities and access to new markets. This will be a new revolution in which we can take an active part. For example, serial production of HyperSat microsatellites based on a common, modular platform is being prepared in Poland. Our companies specialising in data compression, satellite data processing, communication optimisation etc. will gain new opportunities.

That is why our activities should combine romanticism with pragmatism. We should join projects related to space exploration to encourage young people to study and then work in the space sector. And then use the opportunities created by the space sector to participate in the business and technology revolution taking place with its participation. This is how SpaceX works, competing for young engineers with NASA. Which is more exciting: repairing a toilet at a space station, or sending a red roadster towards Mars?

And even though NASA does a thousand times more complicated things than SpaceX on a daily basis, sending probes to Pluto, repairing the Hubble in orbit, etc., in the minds of the young generation of talented engineering graduates, the red Tesla on its way to the asteroid belt wins. Thanks to them, SpaceX can carry out its other, much more business-oriented projects, such as new generations of rockets and the conquest of the satellite services market.

PAP - Science in Poland, Marek Matacz

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