The Space Reviewin association with SpaceNews

VentureStar illustration
The VentureStar RLV was supposed to revolutionize space transportation, but its high development cost as well as X-33 technology development problems doomed the concept. (credit: Lockheed Martin)

Is there a business case for RLVs?

The history of development of reusable launch vehicles (RLVs) is littered with carcasses like some foreboding desert trail. In the last two decades we have seen NASP, Delta Clipper, X-33, X-34, VentureStar, Roton, and others come and go, leaving behind, at best, bits and pieces of hardware. The only successful RLV ever developed has been the Space Shuttle, and even there the word “successful” must be qualified. Thirty years after the Shuttle started, we have only now, in the wake of the Columbia accident, come to the realization that the Shuttle always was, and almost certainly always will be, an experimental, not an operational, vehicle.

Yet, RLVs continue to be the Holy Grail of the launch industry. Develop an RLV that can reduce the cost of space access to some magic number—sometimes $1000/pound, other times as low as $100/pound—and the world will beat a path to your door, industry pundits and advocates claim. Such a vehicle would open space to wide array of new markets currently shut out by high launch costs, from manufacturing semiconductors and protein crystals in microgravity to orbiting hotels for thousands of tourists.

The assumption here, though, is that not only would such a vehicle be able to dramatically increase launch demand, it will be able to generate enough revenue in the process to make a profit, including providing any investors with an acceptable rate of return. A closer examination of the economics of the launch industry, however, suggests that it is unlikely that a business case for an RLV—at least a full-fledged orbital one—can close now or in the near future.

High costs, small markets

The first hurdle RLVs face is the high cost to develop the vehicle. Orbital RLVs that can carry large enough payloads to be commercially useful require significant investments in technology, ranging from engines that can be reused multiple times between overhauls to lightweight composite structures that reduce the mass of the vehicle. NASA has invested in these technologies in fits and starts, notably with the X-33 and the (now sharply downscaled) Space Launch Initiative (SLI). The problems encountered along the way, including the infamous failure of the composite liquid hydrogen tank developed for the X-33, suggest that much more investment is needed before critical technologies are mature enough for use in commercial orbital RLVs.

VentureStar would have cost far more to develop than any commercial jetliner, yet would serve a far smaller market.

These technological issues mean that building an orbital RLV will be an expensive prospect. Some reports suggested that the full cost to develop VentureStar would have approached $35 billion. If this figure seems outlandish, keep in mind that current estimates for the Orbital Space Plane—a vehicle that is essentially only a reusable human-rated upper stage for an expendable launcher—range from $10 to $20 billion. Even if VentureStar’s putative price is cut in half, it still requires a sum greater than what it will cost Airbus to develop the A380 ($10.7 billion) or Boeing to develop the 7E7 (between $7 and 10 billion). Unlike the launch industry, the aviation industry is considerably more mature and understood, yet analysts believe that each company is betting its future on these new aircraft. If spending that amount of money (even with some degree of government subsidization) in a mature industry is considered risky, spending an even larger amount on launch vehicles borders on the insane.

Even if an orbital RLV is developed (most likely through heavy government subsidy), it faces the challenge of making a profit. For RLVs to be cost-effective, they must have a high flight rate. An RLV, like an airliner, makes no money sitting in a hangar. The hope in the industry has been that a RLV with low launch costs would generate considerable additional demand for launches. The latest research, though, indicates that this is most likely not the case.

According to the ASCENT study, cutting launch costs by a factor of four increases launch demand by less than a factor of 2.5: in other words, less revenue despite more launches.

The most quantitative study of the effects of low-cost space access on launch demand is the Analysis of Space Concepts Enabled by New Transportation (ASCENT) study, completed earlier this year by the Futron Corporation under a NASA SLI contract. The report examined how demand for space access would change as a function of launch costs for a wide range of markets, from communications to remote sensing to tourism. The study took a neutral approach to both markets and launch vehicle technology, with no effort to advocate either a certain class of markets or specific launch vehicle technologies.

“The dose of pragmatism produces some sobering outlooks,” notes the report’s executive summary. In the absence of an RLV launch demand remains relatively flat, at about 60 to 80 launches a year through the end of the forecast in 2021. Moreover, reducing launch costs does not stimulate a huge increase in launch demand, as many industry sectors, particularly established ones like communications satellites, have remarkably inelastic demand curves. Introducing a vehicle that reduces the cost of space access by 75% increases launch demand only from about 60 in 2001 to under 140 in 2021. In other words, cutting launch costs by a factor of four increases launch demand by less than a factor of 2.5. It doesn’t take an MBA to realize that such an RLV would generate less revenue than existing expendable vehicles, making it very difficult to pay off the huge investment required to develop such a vehicle.

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