The space industry: a paradigm shift on a global scale
The space sector is at an inflection point similar to what commercial air travel experienced after World War II and the internet saw in the 1990s.
According to a recent study by McKinsey & Company, the current estimate of the industry’s value is $425 billion, an amount 25% higher than five years ago, and is expected to reach $1.4 trillion by 2030.
The emergence of new private players in the sector, such as venture capital funds and high net worth individuals, has injected dynamism and a commitment to reinvention. It can be said that the liberalization of the private sector has fostered a more active environment for innovation and development.
Thus, private sector funding in space-related companies exceeded $10 billion in 2021, almost ten times more than in the last decade. And in 2022, the second largest inflow in history was registered. If the current momentum continues, commercial funding for space ventures could surpass government funding in the next 20 years. This scenario represents a paradigm shift for the industry.
These new private players tolerate very high degrees of risk, which allows companies financing projects in the sector to achieve more important and transformative objectives for the industry. Massive technological innovation is creating the opportunity for more capabilities to be deployed above Earth for the benefit of those on Earth. These capabilities—and the prices at which they can be delivered—could provide the linchpin in solving hard problems not only for businesses but also for civilization and the health of the planet. To give just one example, there has recently been a significant acceleration of the cost curve: launch costs have fallen by 95% (and another massive reduction is expected in the coming years) thanks to reuse, improved engineering and increased volumes. Also, the physical size of space assets is shrinking. Smaller satellites mean less weight to orbit and more capability when the satellites get there.
On the other hand, it should not be forgotten that, in this new global scenario, the private sector pursues its own interests, which do not necessarily coincide with the values expected of nations and their respective public sectors. The key lies in finding a balance for both parties, which requires good supervision by the public sector, a good regulatory framework and a certain flexibility for each of the industry players to focus on their specialty.
There is a real issue with space junk, both from legitimate uses of space and from bad actors who intentionally cause space collisions that result in debris. Although innovation must be preserved, it is also necessary to promote adequate regulation in this regard.
One thing that has not changed since the first space age is the hegemony of the United States. For now, the rest of the international players are far from being able to catch up with its leadership. Their budget is the highest and companies such as SpaceX or Blue Origin have not yet found competition in the international sphere. The European Space Agency (ESA), for example, has a budget three times smaller than that of NASA. However, despite accounting for only around 16% of global spending in the sector, Europe retains around 30% of satellite manufacturing revenues and is the world’s second largest exporter.
Key stakeholders and regulatory framework in the European Union
At the European level, ESA, with an annual budget of more than 7 billion euros, is the main pillar on which the sector is based through the development of technology and space missions of all kinds. ESA is composed of 22 Member States. Since its foundation in 1975, ESA has successfully carried out more than a hundred space missions and its Ariane launcher has performed more than 200 missions. Its activity is grouped into 10 areas, which are structured into mandatory and optional programs. All Member States participate in the mandatory programs, their contribution being proportional to their GDP. In the optional programs, Member States are free to decide their level of participation.
The European Commission, for its part, defines the space sector as strategic for Europe and indispensable for its economy and for the well-being of its citizens. The European Commission’s interest is focused through the development of its own space programs, complementary to those of ESA. At the same time, the technological capacity developed in the space sector and access to its own space infrastructures have proven to be powerful tools for foreign policy and international relations. In terms of defense and security, a solid space sector guarantees access to state-of-the-art technologies and gives international prominence to the countries that have it.
In April 2021, the Council and European Parliament adopted a regulation establishing the new EU space programme for the years 2021 to 2027. The programme entered into force retroactively on 1 January 2021.
It will ensure:
- high-quality, up-to-date and secure space-related data and services
- greater socio-economic benefits from the use of such data and services, aimed at increased growth and job creation in the EU
- enhanced EU security and autonomy
- a stronger role for the EU as a leading actor in the space sector
The regulation simplifies the existing EU legal framework and governance system and standardises the security framework. It improves and brings together existing EU programmes such as Copernicus, Galileo and EGNOS under one umbrella.
The programme also introduces new security components, such as the Space and Situational Awareness (SSA) programme or the new Governmental Satellite Communication (GOVSATCOM) initiative to monitor space hazards and provide national authorities with access to secure satellite communications.
In February 2022, the European Commission proposed two new flagship initiatives to boost satellite-based secure connectivity and Space Traffic Management:
- EU space-based secure connectivity system will ensure worldwide access to secure and cost-effective satellite communications services, for governmental communications and commercial use. It aims to protect critical infrastructures, support surveillance and crisis management, as well as enable high-speed broadband everywhere in Europe to best anticipate future challenges of our economy.
- Space Traffic Management: The exponential applications of space services involve more and more satellites, thus more traffic in space. As the congestion of satellites and debris threaten the viability of space infrastructure, the European Commission and the High Representative of the Union for Foreign Affairs and Security Policy have presented an EU approach on Space Traffic Management (STM). This would further strengthen the Union’s space surveillance and tracking capabilities (already providing collision avoidance services to more than 260 European spacecraft), and set clear standards and regulation for a safe, sustainable and secure use of space.
ESA is working on a transformation of the space sector in Europe in the coming years.
ESA will rely more on industry as a true “partner”, according to recent statements by ESA Director General Josef Aschbacher. This is the same strategy adopted by NASA, which plans, for example, to send its astronauts to private commercial space stations once the International Space Station (ISS) is retired.
Thus, Europe’s major space directives are to be discussed at the second European space summit, which will take place in November this year in Seville (Spain) during the Spanish Presidency of the Council of the EU. Seville was designated in December 2022 as the headquarters of the Spanish Space Agency (ESA), and in 2024 it will once again be European space capital, a title it already held in 2019.
EU flagship programs in the field of space:
Copernicus is the Earth observation component of the European Union’s Space programme, looking at our planet and its environment to benefit all European citizens. It offers information services that draw from satellite Earth Observation and in-situ (non-space) data. The European Commission manages the Programme. It is implemented in partnership with the Member States, the European Space Agency (ESA), the European Organisation for the Exploitation of Meteorological Satellites (EUMETSAT), the European Centre for Medium-Range Weather Forecasts (ECMWF), EU Agencies and Mercator Océan. Vast amounts of global data from satellites and ground-based, airborne, and seaborne measurement systems provide information to help service providers, public authorities, and other international organisations improve European citizens’ quality of life and beyond. The information services provided are free and openly accessible to users.
It is the EU’s global navigation and positioning satellite system. It is the first satellite navigation system for civilian management, compatible with the American and Russian systems, but independent of them. The system will have a network of 30 satellites, to be completed by 2020, with multiple applications, including traffic management, rescue, civil protection, agriculture, fisheries, civil engineering, etc.
The European Commission is responsible for the management and full financing of the program, ESA for its design and development, and the European GNSS Agency (GSA) for its operation, as soon as it is operational.
It is a European satellite-based augmentation system that improves the accuracy and safety of GPS from the 10 meters that this system usually provides to about 2 meters (95%), and allows the system to be used in safety-of-life applications such as air navigation. Unlike Galileo, EGNOS is a pan-European (not global) system and depends on the GPS system.
Luxembourg: a hub in the space industry
Since the creation of SES in 1985, the space industry has grown exponentially in Luxembourg. Luxembourg has been a member of the ESA since 2005, and is one of the largest financial contributors per capita, evidence of the government’s willingness to invest strategically in the development of the space industry.
In 2016, Luxembourg developed the SpaceResources.lu. The initiative was aimed at the creation of a favourable legal and judicial environment for private businesses. In 2017, it has established an efficient legal and regulatory framework with the law on the exploitation and use of space resources that ensures stability and guarantees a high level of protection for investors, explorers and miners. The Grand Duchy was the first European country, and the second worldwide, to offer a legal framework on the exploration and use of space resources, ensuring that private operators can be confident about their rights on resources they extract in space.
The law does not have an objective, purpose or effect of paving the way for any national appropriation of outer space, including the Moon and other celestial bodies themselves. The law clarifies Luxembourg’s national position on the status of the resources that can be extracted from those celestial bodies and in space in general. The Luxembourg law also lays down the regulations for the authorization and the supervision of private space exploration missions, including both exploration and utilization of space resources.
The legal framework created by Luxembourg at that time had important differences with that of the United States. The latter required companies to have more than 50% of their capital backed in that country, while the former did not provide for such a limitation. This law provided clarity at the national level, as a first step towards allowing space-related activities.
This entry of Luxembourg into the space resources race had the effect of attracting large U.S. companies into the sector, including Deep Space Industries and Planetary Resources. For example Planetary Resources, one of the first companies in the space mining sector, sold a stake for about $28 million to the Grand Duchy.
Thus, Luxembourg’s Space Resources Act opened the floodgates to a huge flow of investment to the point that the space industry now accounts for about 4% of the country’s Gross Domestic Product (GDP), the highest in the European Union.
In summary, the current legal framework for space activities at national level is composed of:
- the Law of 15 December 2020 on Space Activities, and
- the Law of 2017 on the Exploration and Use of Space Resources.
- the Law of 1991 on Electronic Media, as modified,
On 10 December 2020, the Chamber of Deputies voted the Law of 15 December 2020 on Space Activities. This new legislation, effective as of 1st January 2021, marks an important milestone in enhancing the Luxembourg legal framework for both space activities authorization and supervision. It will further allow the growth and diversification of activities carried out by space players, especially from the private industry, in Luxembourg.
It contributes to providing a safe and attractive environment for operators, investors and entrepreneurs and will, as such, be a valuable tool for the economic development of the dynamic and competitive space sector in Luxembourg.
In this framework, the authorization and supervision of space activities have been tasked to the Ministry of the Economy and the LSA along with the registration of space objects launched into outer space.
Among other provisions, the Law on Space Activities includes the tax exemption of insurance contracts covering the space objects registered by Luxembourg and an adaptation of the rules regarding the tax credit for investments in order to allow operators of space objects to benefit from tax credit.
The Law on Space Activities does not apply to missions involving the exploration and use of space resources falling under the Law of 20 July 2017 on the Exploration and Use of Space Resources, except for what concerns the registration of launched space objects and tax related provisions.
The Law of 27 July 1991 on Electronic Media remains in effect and will serve as a legal basis for the frequency’s allocation.
Under this legal and regulatory framework, Luxembourg has managed to position itself as a key player in the industry at the international level. The sector is home to just over 70 public and private players, up from twenty in 2016. In terms of employment, the latest statistics show that the sector employs just over 1,400 people (companies and public research bodies), representing almost a doubling in the size of the ecosystem since 2016. In 2026, the opening of the so-called “Space Campus” is planned, an infrastructure project that aims to facilitate the installation and bring together national and international space ecosystem players already present in Luxembourg or wishing to set up in the country.
This project is part of the “Space Strategy 2023- 2027”, which aims to continue the efforts made in recent decades to develop the Luxembourg space sector as a vector of diversification and long-term future of the Luxembourg economy, and also as an important driver to contribute to the sustainability of activities on Earth and to favor a responsible approach to activities in Space.
The 2023-2027 strategy focuses on 4 main areas:
- Sustainability of economic activities;
- Sustainability of activities on Earth;
- The sustainability of activities in space;
- The sustainable use of space resources.
The public investment required to implement the space strategy through participation in ESA programs and the national LuxIMPULSE program amounts to a total of about 256 million euros for the period 2023-2027, an increase of 21.6% compared to the budget for the period 2020-2024.
To conclude, it can be stated that Luxembourg will continue to work to position its space industry at the international level, with increasing public sector support and a regulatory framework adapted to the new challenges ahead.