NEEP 602 Lecture #41

NEEP533 Course Notes (Spring 1999)
Resources from Space

Lecture #41 Show me your ROI!

Title: Planning for Lunar Self Sufficiency

Notes:

"Pure" Management Components for a ³He Enterprise

Professor Thompson's analysis indicated that a lunar ³He mining activity would be of interest to investors if the government financed its R&D in return for supplies of resources it would need at a lunar base (Lecture #40).

His analysis of a purely private initiative, focused only on lunar ³He mining would not be financially attractive.

Are any major private initiatives possible in space without the government's direct financial assistance?

Of course they are, the precedents being:

Geosynchronous communication satellites and satellite communications services (many examples with more appearing every year)
Low Earth Orbit communication satellites constellations

Iridium, Odessey, Geodesic, ORBCOMM, etc.

Low Earth Orbit remote sensing satellites

Earthwatch, ORBIMAGE, SpotImage, Lockheed/Martin, etc.

Launch services (government an essential customer in all cases so far)

Orbital Sciences' Transfer Orbit Stage, Pegasus, and Taurus
McDonnell Douglas' Atlas
Lockheed Martin's proposed LMLV family
Ariane (sort of)

Note that governments are usually significant if not major customers of these services.

Are "Really Big" Private Initiatives Possible in Space?

Similar scale, largely private investment projects:

TransAlaska Pipeline - 1977 - $8B (~$20B now)
England to France "Chunnel" - 1995 - $15B
TransContinental Railroads
US Surface Communications Infrastructure
Aggregated Satellite Communications Investments
Others?

Most of these provided near-term returns on investment as well as internal cash flows that supported expansion.

Must meet national and international regulatory requirements

Launch licenses (DOT)
Communication frequency allocations (FCC and ITU)
Environmental impact (EPA and international precedent)
Outer Space Treaty obligations (Dept. of State)
Other treaty obligations (?)

Launch Costs (see Schmitt, 1994)

The longest financial pole in a large tent full of long poles.

Professor Thompson has shown that the major factor in the cost of large space projects is launch cost.
With respect to lunar ³He, $1000-2000 appears to be about the limit and still have an attractive rate of return for investors

The potential market in space for lunar volatile by-products has not yet been factored into this analysis

Apollo "capital" costs related to research, development, manufacturing, and operations were about $64 billion in current dollars, including the spacecraft, facilities, and training.

Gave a Saturn V launch vehicle that could place a maximum payload of about 43,000 kg on a lunar intercept trajectory as well as about two weeks of space operations related to that payload.

At the end of the Apollo Program, the cost of each additional lunar mission was about $3 billion, if one includes about $500 million as the cost of capital, or
Thus, the cost/kg for the Saturn V would be about $70,000.

In consideration of pure launch costs/kg, and given that the above numbers include spacecraft, operations, and training costs that would be allocated elsewhere, these Apollo numbers define the maximum cost envelope for any future return to the Moon.

However, it can be reasonably assumed that future launch costs, based on the engineering concepts of the Saturn V,would be significantly lower.

Define a "Saturn VI" as follows:

Follow overall design concept of the Saturn V, i.e., liquid fueled engines and multiple stages, however, reusability and strap-on boosters should be considered if appropriate
Payload to the Moon of at least 100,000 kg
Full delivery guidance and control capabilities
Crew rated in terms of reliability, however, uncrewed version also will be required
Robust design (no significant stand-down in the event of a launch failure)
Reliable and low overhead preparatory, launch, and flight operations
Design for long term, steady state production/launch rates of about one vehicle per month
End to end, manufacturing, assembly, and launch pad diagnostics for built-quality control and modular replacement of critical components
Modernize materials, electronic and mechanical components, and fuels without raising overall costs

Considerations that should lower the cost/kg of the Saturn VI relative to the Saturn V are as follows:

Long term production commitment.
More than double the payload capability.
Previous Apollo, Titan, and Shuttle experience permits the design to be focused and finalized at an early stage with little or no uncertainties or parallel designs.
Design to minimum cost with new, proven technologies that can enhance capabilities as well as lower cost (e.g., computers, guidance and control systems, composite materials, etc.).
New, proven manufacturing and test technologies can speed production rates (robotics, just-in-time inventory management, built-in diagnostics, modular design, end to end testing, etc.).
Underused or surplus government facilities may be available for refurbishment and enhancement at less than replacement cost.
New generation of talented, highly motivated young engineers and workers can be attracted to the enterprise.

Will the above considerations be enough to meet the $1000/kg cost goal set by Professor Thompson, that is a factor of 70 reduction over the Apollo baseline?

It is not known as of now, however, if "long term production commitments" and "more than double the payload" can reduce the cost/kg to $20-25,000, at which point the other factors may provide the necessary remaining reduction.
Note that a market in space for volatile by-products may help support a higher launch cost if absolutely necessary but should not be assumed until certain.

One means of attracting private financing would be to build-in early investment returns as well as a source of cash flow during the early R&D period.

Key business element is financing R&D, as Professor Thompson has shown

He also has shown that if the government assumes the burden of financing mining R&D, a reasonable return on investment can be expected.

Probably cannot count on this possibility in the foreseeable future (see for example, Grim Budgets Spur Call to Action, Science, v 272, April 26, 1996, p 477.)

Full private financing may become possible by combining the lunar ³He mining initiative with the terrestrial ³He fusion electric power initiative.

Investment risk and R&D financing requirements reduced by sales of spin-off fusion technologies (Lecture #26)

Inertial Electrostatic Confinement fusion devices can be built small
There are existing and future uses for low cost sources of neutrons and protons

Future returns on investment also increased by returns from sales of fusion electric power plants and/or electricity in addition to sales of lunar ³He and by-products.
contracts to supply government with technology, resources, power, and/or space access could reduce total private financing required

References:

Schmitt, H.H., 1994, Lunar Industrialization: How to Begin?, Journal of The British Interplanetary Society, 47, 527-530.

Supplementary Material

NEEP533 Syllabus

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University of Wisconsin-Madison

Fusion Technology Institute

Lecture #41 Show me your ROI!

Title: Planning for Lunar Self Sufficiency