Author Topic: Reusability effect on costs  (Read 187550 times)

Offline Coastal Ron

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Re: Reusability effect on costs
« Reply #100 on: 08/18/2016 04:44 AM »
The current price is for new core, and SpaceX reserves the right to recover that core. 

The current price is for a launch service for payloads up to 5.5mT to GTO.  It doesn't say anything about the type of core.

As I recall, at least Gwynne Shotwell has addressed this specifically and said that for now their customers will have the option to choose unflown cores or previously flown cores.  AND, if they choose previously flown cores they get a discounted price, which is supposedly around 70% the full price.

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Assuming SpaceX is totally serious about their reuse plans and that the booster stages are actually capable of many reflights (i.e. more than just 3 or 4), they'll have to stop differentiating between "new" and "previously flown" boosters.

I agree that at some point in the future it won't matter.  But since reusability has not been proven or validated yet, and there are potentially unknown risks, SpaceX differentiates the difference between a never-flown core and a previously-flown core by using a different purchase price for those two options.

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There just aren't enough missions on their current manifest that will require expended stages.

So far SpaceX is exceeding their initial projected recovery rate, which if reusability is perfected could mean that SpaceX could move quicker to a higher mix of reused cores.  It will depend on what their customers want though.

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How large a booster fleet do they need?  They'll move production to upper stages and only need a few boosters to make up for failed landings and fleet retirement as booster flight limits are reached.

There are a number of business assumptions SpaceX is making that we don't have insight into.  As a scheduling professional I can make a number of assumptions, but without knowing what the future "demand" will be it's difficult to forecast what they will do.

And if a 1st stage core can be reflown 10 times, then yes, there won't be a need to build new 1st stage cores very often, and the current production line will just stay busy building 2nd stages.  Which is not a bad problem to have if that happens...
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Offline AC in NC

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Re: Reusability effect on costs
« Reply #101 on: 08/18/2016 11:36 PM »
The current price is for a launch service for payloads up to 5.5mT to GTO.  It doesn't say anything about the type of core.  Assuming SpaceX is totally serious about their reuse plans and that the booster stages are actually capable of many reflights (i.e. more than just 3 or 4), they'll have to stop differentiating between "new" and "previously flown" boosters.

I like this articulation and feel it is likely to represent how the pricing model will work.  They will discount for some number of launches confirming reusability but after that they set the price of the launch service to account for demand and strategic objectives with addons to the base launch service extra.  Most importantly, it is my opinion that the base price will be based on the market and their strategic objectives and not specifically a reflection of the launch cost.

Offline Coastal Ron

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Re: Reusability effect on costs
« Reply #102 on: 08/18/2016 11:56 PM »
Most importantly, it is my opinion that the base price will be based on the market and their strategic objectives and not specifically a reflection of the launch cost.

That would be a change from how they price today, where so far they have offered extremely stable public pricing.  And for reusability to really catch on I think the pricing of their services needs to be predictable, since it is the combination of lower pricing and certainty that the prices won't rise that will allow companies to test out new products and services that take years to develop and get ready for launch.

If SpaceX is perceived to have prices that could rise unpredictably, I don't think the market will expand fast enough to need or use a fleet of reusable rockets - not when satellite owners will still want to keep other launch providers busy enough so that SpaceX doesn't become a monopoly (which no one should want).

My $0.02
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Offline AC in NC

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Re: Reusability effect on costs
« Reply #103 on: 08/19/2016 12:36 AM »
That would be a change from how they price today, where so far they have offered extremely stable public pricing.

I'm not suggesting the price will be unstable. 

I'm trying to suggest they will pick their stable price point that reflects the market, how they want to maximize monetizing it, and their strategic objectives.  I guess it's nuance but I feel like a lot of price discussion implicity assumes that the price point with be tied to their costs.  Like if they can save $40M with reuse they'll reduce the price point by $20M.  I think they will not do that.

Feels to me like they will pick a price point that maximizes how they monetize the market and (as a strategic objective) decide how much to concede from their savings.

 

Offline AncientU

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Re: Reusability effect on costs
« Reply #104 on: 08/19/2016 12:48 AM »

That would be a change from how they price today, where so far they have offered extremely stable public pricing.  And for reusability to really catch on I think the pricing of their services needs to be predictable, since it is the combination of lower pricing and certainty that the prices won't rise that will allow companies to test out new products and services that take years to develop and get ready for launch.

If SpaceX is perceived to have prices that could rise unpredictably, I don't think the market will expand fast enough to need or use a fleet of reusable rockets - not when satellite owners will still want to keep other launch providers busy enough so that SpaceX doesn't become a monopoly (which no one should want).

My $0.02

I would expect the opposite... prices could fall unpredictably.  They are 'over achieving' on recovery, and reuse with little refurb appears in the near future.  If they end the year with ten cores in the barn and have relaunched twice successfully, then all launch prices could begin to collapse toward the discounted first reuse launches.

In this environment, companies could fairly confidently test new products and services.  As capital expenditures decrease (SES planning for example), a virtuous cycle may be established.

On the other hand, if you are competing in this launch market, investments in next generation of launchers (like Ariane 6 or Vulcan planning for a halving of 2010-2015 prices by 2020-2025) will always be behind the curve.
« Last Edit: 08/19/2016 12:52 AM by AncientU »
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Online guckyfan

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Re: Reusability effect on costs
« Reply #105 on: 08/19/2016 05:43 AM »
If they end the year with ten cores in the barn and have relaunched twice successfully, then all launch prices could begin to collapse toward the discounted first reuse launches.

That will eventually happen. However IMO not as long as there is a single customer who demands new cores. They could and would keep first launch prices and maybe even increase with shrinking production.

Offline AncientU

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Re: Reusability effect on costs
« Reply #106 on: 08/19/2016 10:54 AM »
A two tier pricing structure may exist for a while, but as the cost gap grows (and additional reliability of the bathtub curve is understood) the high tier will disappear. IMO, of course.
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Online WmThomas

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Re: Reusability effect on costs
« Reply #107 on: 08/19/2016 11:05 PM »
If they end the year with ten cores in the barn and have relaunched twice successfully, then all launch prices could begin to collapse toward the discounted first reuse launches.

If SpaceX soon starts reflying stage one often, they will be pad and processing-constrained, not production-constrained. But without a system that lets them fly weekly or more often, they can't drop prices all that much.

Online Robotbeat

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Re: Reusability effect on costs
« Reply #108 on: 08/20/2016 12:25 AM »
If they end the year with ten cores in the barn and have relaunched twice successfully, then all launch prices could begin to collapse toward the discounted first reuse launches.

If SpaceX soon starts reflying stage one often, they will be pad and processing-constrained, not production-constrained. But without a system that lets them fly weekly or more often, they can't drop prices all that much.
They've shown a 2 week turnaround on a single pad and so far have maintained about 1 launch per month steady state. Once they have their 4 pads running at the same pace and can do test-firings on the pad for reused stages, I see no reason why they couldn't fly once or twice a week with all their pads combined.
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Offline AncientU

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Re: Reusability effect on costs
« Reply #109 on: 08/20/2016 01:07 PM »
If they end the year with ten cores in the barn and have relaunched twice successfully, then all launch prices could begin to collapse toward the discounted first reuse launches.

If SpaceX soon starts reflying stage one often, they will be pad and processing-constrained, not production-constrained. But without a system that lets them fly weekly or more often, they can't drop prices all that much.
They've shown a 2 week turnaround on a single pad and so far have maintained about 1 launch per month steady state. Once they have their 4 pads running at the same pace and can do test-firings on the pad for reused stages, I see no reason why they couldn't fly once or twice a week with all their pads combined.

GS said two per month per pad... that's two per week as their goal.
Work is long underway to deal with pad and processing constraints... a 4-hour roll-out to launch was discussed on last launch broadcast.
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Offline envy887

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Re: Reusability effect on costs
« Reply #110 on: 08/20/2016 04:23 PM »
...
All you know is that the costs have been expended to build, test, qualify, integrate, launch and recover a vehicle. Note that "recover" cost. More than an ELV.

For all you know, they could have a financial model that batches into, say, 100 launches, with a phase in of reuse, where a part of the "reuse to come" has already been part of the LV provider's embedded fixed cost.
...
Again, not an enthusiast here but a businessman with pragmatics. You do know it is a business that is very pragmatic ...

As you say, it's a pragmatic business. Why would they leave money on the table (they could certainly charge more and still have more payloads than they can launch) and at the same time eat the cost of building, flying, recovering, and reusing the vehicle? That's bleeding money both ways for the last 5 years, with no end in sight.

Offline Space Ghost 1962

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Re: Reusability effect on costs
« Reply #111 on: 08/20/2016 06:38 PM »
...
All you know is that the costs have been expended to build, test, qualify, integrate, launch and recover a vehicle. Note that "recover" cost. More than an ELV.

For all you know, they could have a financial model that batches into, say, 100 launches, with a phase in of reuse, where a part of the "reuse to come" has already been part of the LV provider's embedded fixed cost.
...
Again, not an enthusiast here but a businessman with pragmatics. You do know it is a business that is very pragmatic ...

As you say, it's a pragmatic business. Why would they leave money on the table (they could certainly charge more and still have more payloads than they can launch) and at the same time eat the cost of building, flying, recovering, and reusing the vehicle? That's bleeding money both ways for the last 5 years, with no end in sight.

Agreed.

Suggest that the reason would be that they are working to such a financial model as earlier suggested, as a long term pricing where the "early" launch services are under margin while longer term over margin, based on meeting performance objectives as recovery/reuse/gas-n-go progresses.

In that case, the "bleeding money" is like building construction financing, which has aggressive compounding in the "construction"/development phase, and a long "tail-off" during the operational phase-in following.

Offline envy887

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Re: Reusability effect on costs
« Reply #112 on: 08/20/2016 06:55 PM »
How does the already announced reduced prices for rides on reused boosters fit into this financial model? If reuse is already costed in, there shouldn't be room to drop prices.

Offline Coastal Ron

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Re: Reusability effect on costs
« Reply #113 on: 08/20/2016 07:48 PM »
I would expect the opposite... prices could fall unpredictably.  They are 'over achieving' on recovery, and reuse with little refurb appears in the near future.  If they end the year with ten cores in the barn and have relaunched twice successfully, then all launch prices could begin to collapse toward the discounted first reuse launches.

From a customer standpoint, price predictability is far better when you know what the highest price is, not the lowest.  And while prices could fall faster than the market expects, there is likely a floor that will occur fairly quickly due to inherent costs SpaceX has to cover if they want to make a profit - and they have to make a profit on Falcon 9 flights if they want to fund their Mars efforts.

Conversely, there is no real limit to how high prices can rise, so once customers see prices rising they will likely become very hesitant make long-term commitments that require stable pricing.

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In this environment, companies could fairly confidently test new products and services.  As capital expenditures decrease (SES planning for example), a virtuous cycle may be established.

I think SpaceX is hoping to start some sort of virtuous cycle once they achieve some degree of reusability and lower launch prices.

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On the other hand, if you are competing in this launch market, investments in next generation of launchers (like Ariane 6 or Vulcan planning for a halving of 2010-2015 prices by 2020-2025) will always be behind the curve.

These are great times for those of us outside of the launch services sector, but if/when SpaceX does achieve some degree of reusability that justifies significantly lower customer launch prices, there could be major changes ahead for the rest of the launch providers.  And that is both good and scary...
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Offline oldAtlas_Eguy

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Re: Reusability effect on costs
« Reply #114 on: 08/20/2016 08:35 PM »
Initially the norm is new booster and the customer deciding to fly with a reused booster an exception such that SpaceX will give them a discount. But soon thereafter the reused booster will be the norm such that the pricing will not be whether flying a new or used booster but on the risk of recovery.

For RTLS (low risk mostly LEO orbits) becomes the base price.

Then for ASDS (moderate to high based on payload and orbit specifics mostly GTO orbits) several prices or a published  algorithm that gives price based on orbit drop-of delta V, inclination and payload weight.

And finally the no recovery which SpaceX is unlikely to ever sell for F9's once FH is flying (except if the customer is willing to accept significant schedule uncertainty to wait for a close to end of life booster).

Same pricing would be true for FH but slightly more complex since there are more variations on recovery risks.

Offline AncientU

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Re: Reusability effect on costs
« Reply #115 on: 08/20/2016 08:52 PM »
How does the already announced reduced prices for rides on reused boosters fit into this financial model? If reuse is already costed in, there shouldn't be room to drop prices.

Reuse only reduces the hardware side of costs (assuming all of the hardware testing at McGregor, transportation across the country, etc. are included in hardware costs), and that only on the first stage; 25% of hardware cost is locked in as long as second stage is expended.  This is around half the cost of a launch, I believe.  The other half, launch operations, is where further reductions will be realized.  Increased launch rate, better flow, dropping tests like WDR/static fire, automated roll-out, quicker/more efficient turn-around of recovered boosters, etc. have great potential for equivalent or better cost reductions than the hardware side.
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Offline Space Ghost 1962

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Re: Reusability effect on costs
« Reply #116 on: 08/20/2016 09:04 PM »
Yes, with full absorption cost financial model no further improvement would be had.

Yes, CONOPs improvements would advance things independent of manufacturing.

Thirdly, new developments might affect/improve both still further.

Bottom line: we don't know how complicated the financial model is here, and our assumptions may be altogether wrong.

One of the things to keep in mind is that SX business model and financial skills are a very significant part of their strengths against global rivals, who only have to deal usually with attending to governmental financial needs, which don't require as much skill as commercial does.

Like bringing a shotgun to a water gun fight. Don't make the mistake of underestimating this effect.

Offline envy887

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Re: Reusability effect on costs
« Reply #117 on: 08/20/2016 09:29 PM »
You think launch ops currently cost upwards of $30 million expended on every mission? That seems pretty high to me. And they would be eating most of that cost if hardware is $50 to 60 million (which Elons says it does) and they are only charging about $65 million for a commercial launch.

Offline AncientU

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Re: Reusability effect on costs
« Reply #118 on: 08/20/2016 10:24 PM »
You think launch ops currently cost upwards of $30 million expended on every mission? That seems pretty high to me. And they would be eating most of that cost if hardware is $50 to 60 million (which Elons says it does) and they are only charging about $65 million for a commercial launch.

Here is how I came to this cost break-out(based on EM's 75% of hardware cost is first stage):
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The $19M reduction advertised by GS indicates that first stage cost minus retrieval/refurbishment equals that figure.  Assuming rework costs are $3-5M, the first stage hardware costs are $22-24M -- let's use $24M (40% or so of the launch price).  The first stage is quoted at 75% of the F9 hardware costs.  Entire F9 would then cost $32M.  This leaves $30M-ish for all other operations plus profit.

http://forum.nasaspaceflight.com/index.php?topic=40377.msg1541230#msg1541230

YMMV
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Offline envy887

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Re: Reusability effect on costs
« Reply #119 on: 08/21/2016 01:03 AM »
You're assuming they want to pass the entire savings on to customer immediately. I think they will eventually, but first need to recover some of the many millions they spent developing a recoverable and reuseable system.

Musk has said
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Our pricing right now assumes no reusability. None of our prices are contingent on that. Any reusability we're able to achieve would only allow us to reduce prices from where they are today. The more often we're able to fly and the more often we're able to reuse the stages and the less work they require between flights, the lower the costs can be. The boost stage is roughly 70% of the cost of a launch. So, if we're able to reuse it and refly it with minimal work between flights, and customers are comfortable with that - and it might take a few years for customers to get comfortable with that - then obviously there's as much as - ultimately - a 70% reduction from where things are today.

[emphasis mine]

http://shitelonsays.com/transcript/spacex-press-conference-at-the-national-press-club-2014-04-25

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