SPECIAL FEATURE

Originally published in SatelliteFinance Issue 202 (June 2016). Reprinted by permission.

Imagine if you had to scrap your car when it ran out of petrol. This, essentially, is the situation that satellite operators find themselves in.

Geostationary communications satellites are usually designed for a working life of around 15 years. A great deal of effort goes into the design and testing of their mechanical and electrical components to avoid premature failure. Consequently, most satellites are retired not because of component failure but because they run out of fuel to power their thrusters. The idea of being able to re-fuel sat-ellites in orbit is therefore inherently attractive. Unfortunately it is difficult to achieve in practice because there are many different types of fuel valve (the equivalent of a car’s petrol tank cap) in existence and few, if any, existing valves were designed to be robotically opened and resealed after many years in space.

An alternative approach is to use a space tug, a separate spacecraft that docks with an existing satellite and takes over the sta-tion-keeping functions, and in some cases attitude control as well. The tug approach is technically much simpler (the tug only has to attach itself firmly to the satellite and stay there, instead of having to open and close valves and transfer corrosive liquid fuel at high pressure). In theory, using a tug is less energy-efficient than re-fuelling because an in-orbit tanker can detach as soon as re-fu-elling is complete while a tug has to sta-tion-keep its own mass as well as the mass of the satellite for the duration of its mission. However, this may be counteracted to some extent by the fact that newly built tugs can take advantage of recently developed and more fuel-efficient electric thrusters, whereas for the foreseeable future tankers will need to carry chemical fuel for the rocket thrusters that most existing satellites use.

Electric thrusters still consume chemical propellant but they achieve higher effi-ciency than traditional chemical thrusters by employing electric fields to accelerate the pro-pellant as an ionised gas or plasma to a much higher velocity as it is expelled. For example, NASA has estimated that the fuel efficiency of its latest ion thruster is 10-12 times greater than a conventional rocket engine.

So far two companies, Orbital ATK and Effective Space Solutions, have announced the imminent commercial launch of tug

systems for satellite life extension. US-based Orbital ATK’s system is called the Mission Extension Vehicle (MEV) and was origi-nally developed by ViviSat, a joint venture between ATK Systems and US Space. The MEV is based on a medium-sized (2–3 ton) spacecraft bus called Gemini using a combi-nation of chemical and electric propulsion, and it provides both station-keeping and attitude control functions for up to 15 years. Effective Space Solutions is a UK-based company which has developed a much smaller all-electric platform weighing around 350kg, which enables the spacecraft to be launched as a rideshare with other satellites. It is designed to provide station-keeping only (with attitude control provided by the satellite to which it is attached) with an expected service life of at least seven years. This approach is likely to mean that Effective Space Solutions’ man-ufacturing and launch costs will be much lower than Orbital ATK’s.

So what about the economics? The upfront cost of a large geostationary com-munications satellite including the satellite itself, launch costs and insurance is typi-cally US$300m-350m. The weighted average cost of capital for large satellite operators is currently estimated at 7-9% per annum. This suggests that the annual value to an operator of deferring satellite replacement is US$20m-32m. Ordinarily it would be dif-ficult to find out how much tug providers actually charge, but Orbital ATK is currently in a legal dispute with US Space – covered by SatelliteFinance on page 17– and papers filed with the Supreme Court of the State of New York show the prices that the now-dissolved ViviSat JV had agreed in memoranda of understanding with prospective customers.

These figures suggest ViviSat was intending to price based on the expected value of its service to individual operators (i.e. taking account of variations in their weighted average cost of capital) and was planning to split the economic benefits roughly 50/50 with its customers, although once ViviSat’s costs were subtracted from its share, the margins on these early sales must have been quite slim. Effective Space Solutions also intends to price according to expected value, while relying on its small spacecraft cost structure to improve the business case.

Besides simply extending the life of a station-kept satellite in its current location, tugs can also be used to de-orbit satellites that have become stranded in geostationary orbit (freeing up space in this uniquely valuable orbit), and bring satellites in inclined orbit back to station-kept orbit (significantly increasing their revenue-earning potential). Perhaps most interestingly of all, tugs can be used to relocate satellites to new geosta-tionary orbital positions. Relocation gives operators the chance to test out the market in new geographies at relatively low cost before committing to the expense of building and launching a new satellite. At a time when the satellite industry faces many uncertainties from terrestrial competition and the devel-opment of high-throughput and low Earth orbit satellites, this flexibility could be a key factor in persuading satellite operators to hand over the keys to the tug providers.

Philip Bates is a principal at TMT advisory specialist Analysys Mason, which works extensively with satellite operators and service providers and their investors on market forecasting, business planning and transaction support projects.

RUNNING ONThe business case for extending the life of satellites in orbit By Philip Bates, principal at tmt advisory specialist analysys mason

Expected revenues from ViviSat’s satellite life extension service. Source: US Space papers filed with the Supreme Court of the State of New York, 2016