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Recycle, reuse: How cheap can SpaceX make space?

SpaceX is on the verge of realizing its dream of reusable rocketry, but space is hard, and the economics of space is no exception. 

The SpaceX Falcon 9 makes its way into the port of Los Angeles in mid-January for the company's first launch since a fireball engulfed a similar rocket on a Florida launch pad more than five months ago.
Chuck Bennett/The Daily Breeze/AP/File | Caption

A SpaceX booster rocket may soon go where no rocket has gone before: back into space.

The California-based aerospace company has successfully recovered at present seven booster stages, but so far they’ve remained on display or sitting in warehouses. That could all change as soon as March, when communications company SES has agreed to let its satellite be a guinea pig for the first re-launch of a Falcon 9 stage one booster.

The rocket’s previous outing boosted a payload containing resupplies for the International Space Station last April. It then navigated back through Earth’s atmosphere to land autonomously on a drone ship in the Atlantic Ocean for the company’s second successful first-stage recovery.

Second stages are not designed to be re-useable, but about 75 percent of the vehicle’s costs are locked up in the first stage, according to SpaceX founder Elon Musk.

After a test-firing in late January, the booster is now being transported to Cape Canaveral in preparation for the SES launch, tentatively scheduled for March. Other SpaceX rockets not slated for re-launch have undergone as many as seven test-firings.

A re-launch will represent a massive milestone for SpaceX, which set out to revolutionize rocketry 15 years ago with the expressed goal of developing reusable vehicles.

Reuse is “just as fundamental in rocketry as it is in other forms of transport – such as cars or planes or bicycles,” Mr. Musk said in a briefing after last year’s April launch.

Imagine if you could only use an automobile once, driving to your destination, and then buying another to return home. Only the richest of the rich would be able to go on road trips in such a world. Now imagine that car costs from tens to hundreds of millions of dollars.

The way Musk explains it, anyone can see that disposable rockets are a losing game, but former NASA deputy associated administrator for exploration systems development Dan Dumbacher pointed out it’s not as simple as gassing up your car and driving home.

The space shuttle engines were reusable, he told Space News in 2014. “We tried to make them reusable for 55 flights. Look how long and how much money it took for us to do that, and we still weren’t completely successful for all the parts. I want to be realistic: We are not as smart as we think we are and we don’t understand the environment as well as we think we do.”

The economics of recycling rockets is very different from that of recycling planes, trains, and automobiles.

“There are ongoing challenges in translating a reused rocket to tangible capex savings – worries about it failing, insurance implications, retrofitting turnaround, building up a critical mass of reused first stages in the warehouse,” Jefferies International LLC, an investment bank covering telecommunications satellites, wrote in a report studying SpaceX’s costs.

In addition to the substantial added costs of insurance, testing, and refurbishing, landing a rocket takes more fuel too. As much as 30 percent more propellant, according to French space agency CNES. That’s more weight the engines need to hoist into space, where kilograms don’t come cheap.

All these extra costs add up, making how many times a company can fly the same rocket a critical factor. According to a 2014 CNES estimate, a completely reusable first stage booster would have to fly 50 times a year to cut costs by 10 to 20 percent. Chief Executive Stephane Israel of competing aerospace company Arianespace has floated 35-40 launches as the magic number, but SpaceX has yet to state a minimum profitable target.

But SpaceX’s numbers do paint a rosier picture. While most of the privately held company’s information is guarded, Jeffries put together a report last year analyzing the savings of reusability based on public comments.  

Assuming a more modest goal of 15 annual launches per Falcon 9 (Musk’s comments suggest he expects “dozens”), Jeffries found that SpaceX could save over $25 million per launch from their $61 million sticker price, assuming current profit margins of 40 percent. Jeffries suggests those profits could rise as high as 77 percent per launch, if the company is generous enough to pass along half of its savings to the consumer.

But the March contract with SES, which is SpaceX’s biggest client in terms of contract number, shows only a 10 percent discount for the risk and honor of being the first to ride a second-time rocket.

The satellite company has repeatedly said it was willing to be that guinea pig, but had publicly stated it was hoping for a 50 percent price drop, Space News reported last April, leaving some to wonder if Musk is playing it safe as SpaceX ramps up its refurbishing operation, or if the economics of reusability are proving as complicated as competitors claim.

Regardless of where SpaceX’s future pricing structure lands, the company has already brought about significantly cheaper space access through vertical integration, with everything from circuit boards to solar panels designed in house. Such strategies have already allowed the company to do for $90 million what competitors do for $380 million, and reusability could only help that bottom line.

Plus, Musk still has a few more tricks up his sleeve. Next up, reusable nose cones. “That will certainly help, because each of these costs several million,” he said.