Author Topic: Reusability effect on costs  (Read 167833 times)

Offline john smith 19

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Re: Reusability effect on costs
« Reply #660 on: 10/12/2017 09:34 PM »
He also mentions that "the economics are not quite that simple." I am guessing that refers to the fact that any increase in contracts won due to lower prices would have to be factored in, plus internal launches for the constellation will have interesting accounting. Also as I see it, the $1 billion is a sunk cost at this point, so it doesn't truly matter, and in an analysis of "was it worth it" you have to account for the fact that it got them the experience they need to design BFR, so in some difficult to account for way BFR can pay this off.
But let's start with the chunk of cost (to SX) that not building a booster saves them.
Quote from: meberbs
"Profit" may not be Musks ultimate goal but development cost recovery ASAP certainly does.
You clearly didn't actually read the link (it is not that long) since the part I referenced above directly contradicts this.
And you'd be wrong, however what I didn't do was include the word "partial" in my comment.
My mistake.  :( It should have read.

' "Profit" may not be Musks ultimate goal but partial development cost recovery ASAP certainly does. '

Since it was obvious that even with a very large profit margin per flight it would 50-100 launches to recover the whole (stated) development cost.

And with BFR/BFS expected to be in the $4-5Bn minimum it'll be interesting to see what SX's prices really turn out to be.

Quote from: meberbs
Also, the price difference will not be 0, he said the difference in price between new and reused will go away, this does not mean that they will charge current new prices for everything, just the same price for everything. And the rough analysis I did above indicates we can know something about costs.
That is certainly an option.

Time will tell if it's an option they choose to take.
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Offline Space Ghost 1962

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Re: Reusability effect on costs
« Reply #661 on: 10/12/2017 09:36 PM »
It's hard to have a discussion just centered on costs. Because the assumption is that all else is the same. That's not always true.

Immediately we see this with the reflight of boosters. There are payloads jumping ahead in the manifest, usually because of booster availability. The closest, imperfect analog for ULA is "Quick Launch" of Cygnus to "catch up" CRS given Antares RTF. Different.

A more critical difference is how the market changes for payloads/providers. Or ... how the future is formed, one step at a time.

Also, examine competitive response (including "Quick Launch") as providers react to the future being formed. Perhaps the need for more RD-180's, deadlines for BE-4, shifting off commercial payloads from Angara, plans for Ariane "next", changes in Centaur/ACES rollout ... are ways to interpet how providers see "reusability effects on costs" longterm?

If Musk is losing his shirt on reusability, all the other providers would likely "go slower" and "change less", because they'd not care to risk more, to no advantage. You'd want to amortize gains of your current outlays as long as possible, and not "borrow more".

For me, the whole effect narrowly is that of how the provider with reuse grows global market share of annual launches, as an aggregate sum, where the net profit growth year over year (or "run rate") tells the story of cost reduction.

For an expendable vehicle strategy is optimum for an inflexible, low/no growth industry. Cost containment like ULA does is perfect for such.

But its not if you've changed the industry to depend on reuse to be the key stimulus for growth.

Offline john smith 19

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Re: Reusability effect on costs
« Reply #662 on: 10/12/2017 10:33 PM »
It's hard to have a discussion just centered on costs. Because the assumption is that all else is the same. That's not always true.

But its not if you've changed the industry to depend on reuse to be the key stimulus for growth.
Indeed.
 
Long ago I read a fable of the "Connecticut Buggy whip Company," who in the late 19th century was a major supplier of buggy whips.

There productivity and innovation in mfg methods and cost reductions were a legend. Their staff were carefully selected, well trained and well paid.

There was really only one thing wrong with the company.

They believed "horseless carriages" were a passing fad.

And that was the end of the "Connecticut Buggy whip Company,"  :(

Time will tell who turns out to be the "Ford" (or Boeing) of 21st century launch and who turns out to be the "Buggy whip mfgs"
BFS. The worlds first Methane fueled FFORSC engined CFRP structured A380 sized aerospaceplane tail sitter capable of flying in Earth and Mars atmospheres. BFR. The worlds biggest Methane fueled FFORSC engined CFRP structured booster for BFS. First flight to Mars by end of 2022. Forward looking statements. T&C Apply So, you are going to Mars to start a better life? Picture it in your mind. Now say what it is out loud.

Online envy887

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Re: Reusability effect on costs
« Reply #663 on: 10/12/2017 11:35 PM »
Re. whether the $1B spent on reuse was a good investment... SpaceX didn't borrow the $1B to fund reuse to pay it back with interest, or spent $1B of their own cash that they could have used for something more profitable.

SpaceX was able to raise money because their value after creating a reusable system is higher than without it. Now they have to operate the system at a profit to maintain the revenue that is the reason for that value. Or they can turn over that investment into a more efficient system that's potentially far more profitable.

Online TrevorMonty

Re: Reusability effect on costs
« Reply #664 on: 10/13/2017 01:28 AM »
For current market SpaceX don't need to lower their launch prices as they are competitive enough. Having room to move is nice if competition starts dropping prices.

The big unknown is if launch prices drop dramatically (eg $30m) what new markets would develop. Hopefully driving high demand resulting in double or triple launches. Space tourism is one market that would benefit from lower launch prices.

Online Robotbeat

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Re: Reusability effect on costs
« Reply #665 on: 10/13/2017 03:20 AM »
I hope this is the right thread for this:

SpaceX reassures commercial satellite market: Falcon 9 won’t soon be scrapped for BFR

Peter B. de Selding reports the remarks by SpaceX Sr. Director Tom Ochinero. Some key points are:

Discount for Falcon 9 with re-used first stage will be phased out
So no discount.  If SpaceX had not spent the $1 billion for reuse development, it could be charging less, flying smaller rockets to get the same capability, etc.?

 - Ed Kyle
I straight up don't believe Ochinero; I think he's covering for the fact that SpaceX is phasing out the reuse discount.

SpaceX plans 30-40 flights per year. If vast majority of them are reused with block 5 with same current price but the significantly lower (~$30 million less) internal costs, then they can pay back that $1 billion in a single year, not 10.

So I think SpaceX just wants to keep the costs higher for as long as the market will bear so they can pay for BFR with the profits.
« Last Edit: 10/13/2017 03:21 AM by Robotbeat »
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Offline Geron

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Re: Reusability effect on costs
« Reply #666 on: 10/13/2017 06:46 AM »
I think we can all agree that more r and d money for spacex is money well spent.

Also, as spacex is poised to enter satellite telecom industry offering clients low costs partially eliminates their hard earned vertical integration advantage if they successfully go from launcher to launcher and operated.

Offline woods170

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Re: Reusability effect on costs
« Reply #667 on: 10/13/2017 07:05 AM »
I hope this is the right thread for this:

SpaceX reassures commercial satellite market: Falcon 9 won’t soon be scrapped for BFR

Peter B. de Selding reports the remarks by SpaceX Sr. Director Tom Ochinero. Some key points are:

Discount for Falcon 9 with re-used first stage will be phased out
So no discount.  If SpaceX had not spent the $1 billion for reuse development, it could be charging less, flying smaller rockets to get the same capability, etc.?

 - Ed Kyle

Perhaps. Perhaps not.

But they would certainly not be closer to a vehicle than can get affordably anyone Mars.
This.
Falcon 9 REALLY is there to do just two things:
1. Provide revenue to finance the Mars plan.
2. Provide a platform to develop the most critical of the new technology needed to execute the Mars plan.

Add. 1 - Providing revenue: This is being done in a beautifully elegant way: Drive down the cost far enough to be highly competitive while maximizing revenue. Hence the price difference between new and flown booster stages going away. All of them will be priced similar, with the caveat being that flown boosters will be available sooner. SpaceX customers will have a choice between flying earlier on a previously flown booster or fly (much) later on an all-new booster. So, the incentive to use a previously flown booster is changing from a monetary discount to a time-discount. A big factor that is helping SpaceX to do business this way is that launch insurancy companies no longer distinguish between new and previously flown boosters. Insurance for both is equally expensive and might even shift towards insurance for missions on previously flown boosters becoming less expensive than for missions on new boosters.

Add. 2 - Technology platform: A fine example of this we have seen on the last 3 missions. On every single one of those last 3 missions SpaceX has been slowly increasing the angle-of-attack of the re-entering booster stage. This is yet another phase of R&D applicable to BFR's EDL profile. If SpaceX pushes too far and loses a booster stage in the process it is not a loss to them. They will have gained all the knowledge (from telemetry) they need. The lost booster hardware is really no loss because SpaceX currently has more recovered booster stages than they have reflights for. Naturally, that will change once Block 5 comes online so that is why SpaceX is performing the ELD experiments now, while the "more expendable" Block 3 and Block 4 boosters are still available.
The upcoming re-entry experiments using the second stage will expand the SpaceX knowledge-base in several areas, not the least of which will concern (improved) TPS materials.
« Last Edit: 10/13/2017 07:12 AM by woods170 »

Offline john smith 19

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Re: Reusability effect on costs
« Reply #668 on: 10/13/2017 07:31 AM »
I straight up don't believe Ochinero; I think he's covering for the fact that SpaceX is phasing out the reuse discount.
Not really a cover up. More a simple statement of what SX are going to do. Because they can.
Quote from: Robotbeat
SpaceX plans 30-40 flights per year. If vast majority of them are reused with block 5 with same current price but the significantly lower (~$30 million less) internal costs, then they can pay back that $1 billion in a single year, not 10.
OTOH if  you're right (given his comments about it "Taking 10 years to recover the $1Bn spent" would seem a bit deceptive.
Quote from: Robotbeat
So I think SpaceX just wants to keep the costs higher for as long as the market will bear so they can pay for BFR with the profits.
Should this come as a surprise to anyone?

However for those of us think any serious expansion of the use of space (IE on orbit mfg or settlement, holidays to orbit or the Moon etc) will need a serious (1-2 orders of magnitude) reduction in price that's not good news.

But not really a surprise to anyone familiar with the classic economics of the sole mfg/sole operator model.  :(

Musk comes from the IT industry. It's a business with a long history  of viewing competition as good, but monopoly (NCR, IBM, Microsoft) as much better. :(  Something to keep in mind.
BFS. The worlds first Methane fueled FFORSC engined CFRP structured A380 sized aerospaceplane tail sitter capable of flying in Earth and Mars atmospheres. BFR. The worlds biggest Methane fueled FFORSC engined CFRP structured booster for BFS. First flight to Mars by end of 2022. Forward looking statements. T&C Apply So, you are going to Mars to start a better life? Picture it in your mind. Now say what it is out loud.

Offline Geron

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Re: Reusability effect on costs
« Reply #669 on: 10/13/2017 07:51 AM »
When it comes to "recovering the billion spent on reuse" you have to keep in mind the opportunity cost of selling 10% of spacex to fidelity/google at a valuation of 10 billion.

Now spacex is valued at 50-125 billion. This means reusability investment of 1 billion cost not 1 but 5 billion.

It is not dishonest to consider the fact that 1 billion dollars in 2014 is more than a billion dollars in 2018.

Offline woods170

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Re: Reusability effect on costs
« Reply #670 on: 10/13/2017 09:07 AM »

Now spacex is valued at 50-125 billion. This means reusability investment of 1 billion cost not 1 but 5 billion.

Wrong take away. The actual investment, in real dollars, is $1 billion. The value of that investment is now estimated at $5 billion.

Online Robotbeat

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Re: Reusability effect on costs
« Reply #671 on: 10/13/2017 12:55 PM »

Now spacex is valued at 50-125 billion. This means reusability investment of 1 billion cost not 1 but 5 billion.

Wrong take away. The actual investment, in real dollars, is $1 billion. The value of that investment is now estimated at $5 billion.
This is one way of reconciling Ochinero's comments: if you invest $1 billion in a very risky bet, you'll need much more than 1:1 return to justify the risk of the original investment.
« Last Edit: 10/13/2017 01:00 PM by Robotbeat »
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Online Robotbeat

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Re: Reusability effect on costs
« Reply #672 on: 10/13/2017 12:58 PM »
I straight up don't believe Ochinero; I think he's covering for the fact that SpaceX is phasing out the reuse discount.
Not really a cover up. More a simple statement of what SX are going to do. Because they can.
Quote from: Robotbeat
SpaceX plans 30-40 flights per year. If vast majority of them are reused with block 5 with same current price but the significantly lower (~$30 million less) internal costs, then they can pay back that $1 billion in a single year, not 10.
OTOH if  you're right (given his comments about it "Taking 10 years to recover the $1Bn spent" would seem a bit deceptive.
Quote from: Robotbeat
So I think SpaceX just wants to keep the costs higher for as long as the market will bear so they can pay for BFR with the profits.
Should this come as a surprise to anyone?

However for those of us think any serious expansion of the use of space (IE on orbit mfg or settlement, holidays to orbit or the Moon etc) will need a serious (1-2 orders of magnitude) reduction in price that's not good news.

But not really a surprise to anyone familiar with the classic economics of the sole mfg/sole operator model.  :(

Musk comes from the IT industry. It's a business with a long history  of viewing competition as good, but monopoly (NCR, IBM, Microsoft) as much better. :(  Something to keep in mind.
Don't worry too much about it. Blue Origin can compete, and even China and Europe have F9-like recovery of boosters in the conceptual design stage. SpaceX just has to make hay while the Sun shines in order to pay for the next big step.
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To the maximum extent practicable, the Federal Government shall plan missions to accommodate the space transportation services capabilities of United States commercial providers. US law http://goo.gl/YZYNt0

Offline Geron

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Re: Reusability effect on costs
« Reply #673 on: 10/13/2017 06:10 PM »
On a personal note, if a rocket price is 40 million vs 63 million, I still can't afford one seat.

If they charge 63 million for more R and D money and get a larger rocket, fully reusable, such that launch cost is 1-2 million for 100 people, then I can buy myself a ticket.

This is why I am all for Elon Musk keeping prices stable and if anything raising prices to whatever the market will bear as his rockets are now probably classed as more reliable.

Offline RedLineTrain

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Re: Reusability effect on costs
« Reply #674 on: 10/13/2017 06:56 PM »
I would like to see them move the price down a bit to demonstrate to the market that lower prices are coming.  It should increase launch demand at the margins.

Offline rockets4life97

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Re: Reusability effect on costs
« Reply #675 on: 10/13/2017 07:40 PM »
I would like to see them move the price down a bit to demonstrate to the market that lower prices are coming.  It should increase launch demand at the margins.

I think SpaceX will if they see themselves not having enough payloads to fly the rate they want. I'm not sure what that rate. 2018 is 30 a year. Do you think SpaceX is aiming for 50 a year or more?

Offline Geron

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Re: Reusability effect on costs
« Reply #676 on: 10/14/2017 02:59 AM »
More isn't allways better, sometimes its just more.

Space Launch is essentially an oligopoly with at times monopoly like behaviors.
In this type of environment, in order to maximize profit,
(which is ideal for SpaceX as they are able to use that as BFR money),
Launch rate should be set to maximize revenue to whatever extent marginal cost does not exceed marginal revenue.
The only other aside is that given there are competitors in a relatively small industry you have abnormal behavior, for example when Orbital booked a ULA bird at a much higher price, after their RUD; or when OneWeb booked a rocket that hasn't been launched yet or even close for their satellite constellation.

When Iridium put up their first constellation it cost about 5 billion dollars. If SpaceX started offering super low cost launches they would not be in a position to maximize revenue on their satelite internet business.

If I were chief economic advisor to Elon, I would counsel him to maximize revenue on the Satellite internet business by keeping launch prices high, to keep out competitors such that SpaceX can offer the fastest and cheapest space based internet on the market. If successful, Mars colony money should be readily available.

Why maximize revenue of a 10 billion dollar per year launch business, when a 1 trillion dollar per year space based ISP business is on the line.

Offline Geron

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Re: Reusability effect on costs
« Reply #677 on: 10/14/2017 03:00 AM »
My point is, that as reusability is no doubt lowering internal costs for SpaceX, I am not sure that lowering launch costs is the best move right now.

Offline guckyfan

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Re: Reusability effect on costs
« Reply #678 on: 10/14/2017 03:42 AM »
My point is, that as reusability is no doubt lowering internal costs for SpaceX, I am not sure that lowering launch costs is the best move right now.

I think after talking so much about reducing cost they should reduce their prices just a little, say below the $ 60 million threshold. No reason to go to $ 40 million or less, even if they could.

Online Robotbeat

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Re: Reusability effect on costs
« Reply #679 on: 10/14/2017 04:02 AM »
My point is, that as reusability is no doubt lowering internal costs for SpaceX, I am not sure that lowering launch costs is the best move right now.

I think after talking so much about reducing cost they should reduce their prices just a little, say below the $ 60 million threshold. No reason to go to $ 40 million or less, even if they could.
Not until their manifest is burned down. Maybe next year.

But another thing they could do to attempt to stimulate more demand (on an IMLEO basis) through larger payloads is to keep per-launch prices about the same but offer much more payload on BFR.
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To the maximum extent practicable, the Federal Government shall plan missions to accommodate the space transportation services capabilities of United States commercial providers. US law http://goo.gl/YZYNt0

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