| Practice area: | Downstream Terrestrial Applications | Exploration and Infrastructure | Space |
|---|---|
| Client: | European Space Agency (ESA) |
| Published: | 31 August, 2022 |
| Keywords: | #ESA #European Space Agency energy space economy Space in Focus |
Space-based Solar Power (SBSP) is a concept that has existed since the 1970s, but developments in the space industry, concerns about Europe’s energy security, and the need to decarbonise have created a renewed interest in the concept. In this context, the European Space Agency (ESA) commissioned London Economics and Frazer-Nash to investigate the technical feasibility, economics, and potential impact of SBSP to address Europe’s terrestrial energy needs. In this edition of Space in Focus, Farooq Sabri and James Forrester explore these issues and present some of the key results from this study.
The full outputs from this study can be found here. For questions about the study and other queries, please contact the Space Team at [email protected] or visit the team’s webpage here where you can view previous editions of Space in Focus.
Europe’s energy crisis
Energy policy has reached the top of the political agenda in Europe in 2022. Few days go by without headlines in mainstream media lamenting the current state of the energy market. Russia’s invasion of Ukraine and the resulting impact on the gas market is well known, but gas is not the only energy source currently reeling. Low winds, strained river resources, and maintenance issues have seen reductions in wind, hydropower, coal shipments, and nuclear output across Europe (see Figure 1 below). This convergence of climate and energy related shocks has resulted is a steep increase in the market price of electricity and threaten an erosion of living standards and industrial competitiveness on a scale not seen for a generation. Government efforts to shield consumers from these impacts will cost billions and do little to address Europe’s underlying supply vulnerabilities.
Figure 1: Crisis drivers and emergency mitigations across Europe
Source: Map by NathanaëlE25 – Own work, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=90638500
At the same time, Europe is committed to decarbonising its economy by 2050. Emissions from fossil fuels are among the largest sources of greenhouse gases in Europe. Ultimately, Net Zero will require the near complete decarbonisation of the European energy system. Under current European energy plans, this requires replacing high-carbon energy generation with renewable energy sources such as wind, solar, and nuclear power. This approach will be accompanied by policies to increase energy efficiency and reduce overall demand for energy in Europe. While overall energy demand is expected to fall, the electrification of heating and transport will increase the overall load on the power grid. Forecasts suggest that electricity demand in Europe could more than double over the next three decades as the Net Zero deadline approaches (see Figure 2 below).
Figure 2: NZ2050 Europe Total energy supply by source fuel (ktoe)
Source: LE analysis using various sources, including European Commission and IEA. See LE report for details.
This necessitates a huge expansion in solar and wind generation capacity. However, renewables suffer from seasonal variability, intermittency, and locations that mismatch demand. This suggests a heavy reliance on nuclear power and storage technologies to balance the variability in demand and supply, and a large investment in grid infrastructure.
While the production of renewable electricity is typically cheaper than fossil fuel sources, grid integration costs can make renewables less competitive. As the share of intermittent renewables increases, these integration costs become much more challenging. For example, European (and global) electricity storage is currently limited, with global storage capacity of only 17 GW in 2020. According to the IEA, capacity must increase to 585 GW worldwide by 2030 in order to stay on the pathway to Net Zero by 2050.[1] This represents a substantial challenge to the European grid network.
In this context, the investigation and adoption of alternative baseload energy is a strategic imperative. A more diverse energy mix using sources with mutually independent vulnerabilities will also enhance supply resilience and reduce Europe’s geopolitical vulnerability to imported fuels.
SBSP: a novel solution?
Space-based solar power (SBSP) represents one such technology. This concept uses very large satellites to collect high-density solar power from space and transmit it wirelessly to a fixed point on Earth The sun’s higher irradiance in space and the lack of cloud cover means that SBSP has the potential to be a fully independent, clean, continuous, dense, and dispatchable source of electricity.
Source: Satellite Applications Catapult
The viability of SBSP depends on these characteristics and its price competitiveness relative to alternative energy sources. Comparisons of the forecasted Levelised Cost of Electricity (LCOE) between SBSP and other energy sources by 2040 suggest that SBSP will be roughly competitive with oil, gas, and coal.
Figure 3: LCOE and VALCOE of energy generation sources by 2040 (2022 prices, €/MWh)
Source: London Economics analysis using IEA, Fraunhofer, Trinomics, and UK BEIS data
The LCOE estimate for SBSP assumes a 20% investment hurdle rate which accounts for the concept’s significant technical and commercial risk. While the concept is technically feasible, significant development work and funding is needed before an in-orbit prototype can be achieved.
A lower investment hurdle rate used for existing generation technologies (of 10%) would make SBSP more competitive, but this assumes that higher levels of technical maturity and investor appetite are achieved.
The LCOE also fails to account for the full ‘social cost of carbon’, grid integration costs, and other negative externalities from electricity generation. The competitiveness of SBSP significantly improves if these factors are considered. In fact, our analysis suggests that a scaled SBSP solution can deliver over €180bn in net benefits to Europe.
The largest source of which arise from the avoided financial costs of conventional energy sources that would be displaced by SBSP (€302.4bn). Other quantifiable benefits include the social benefit of avoided carbon emissions (€233.2bn), the spillover benefits from R&D spending (€64.5bn), and the opportunity cost of land used for terrestrial energy generation (€0.3bn). By comparison the cost of providing SBSP to meet projected demand, including development, capital expenditure, and operating expenditure, is estimated at €417.9bn.
Figure 4: Net Present Value of costs and benefits of a European SBSP
Source: London Economics analysis
SBSP also offers Europe several strategic benefits that cannot be quantified. This includes the resilience value of an additional source of clean, baseload, and dispatchable energy (reducing the burden on nuclear and balancing the intermittency of wind and solar); a reduction in the geopolitical risks associated with importing fuel (gas, oil, coal, and uranium); and technological first mover advantage which could lead to future export opportunities.
Barriers and challenges for SBSP development
Nevertheless, the success of SBSP relies on overcoming significant technical and commercial challenges. For example, Wireless Power Transmission (WPT) and in-orbit assembly and maintenance, are major technical milestones that need to be achieved. However, these are immature concepts that need significant sums of money and development time. Likewise, the mass requirement of an SBSP system and the scale of SBSP that is needed to make a meaningful contribution to Europe’s energy mix also require a vast expansion in Europe’s launch capacity and industrial base. A clear demand signal from Europe could go some way in incentivising industry to respond to the challenge. However, such a large-scale investment will require a degree of direct government financing, coordination, and/or formalised customer commitments to de-risk investments from the private sector.
Even beyond these technical barriers, SBSP is at the mercy of regulatory, legal, and political constraints, including acquisition of land for SBSP’s rectennas, frequency and orbital rights, decommissioning, and debris mitigation. These challenges are not insurmountable, but they do need attention.
Space-Based Solar Power in the European context
The green transition to Net Zero by 2050 requires a major upheaval in Europe’s energy policy. Today’s energy crisis underlines Europe’s impotence as a fuel importer with little room to manoeuvre. The search for an alternative baseload energy source is thus fundamental to Europe’s security and justifies the exploration of concepts such as SBSP. Our study investigates the SBSP concept in detail and is published in advance of the upcoming ESA Ministerial Council Meeting in November 2022[2]. This presents an opportunity for European policy makers to carefully consider the costs and benefits of SBSP at a time where the costs of doing nothing are glaringly evident.
Farooq Sabri is an Associate Director at London Economics’ Space Team. He advises national governments, international organisations and space agencies on the economics of space, with expertise in launch, Earth Observation, GNSS, and satellite telecommunications. He can be reached at: [email protected]
James Forrester was previously an Economic Consultant at London Economics. He has experience in public policy advice, including in the space sector where he has advised space agencies and other public bodies on the economics of space across the full range of space technologies. He can be reached at: [email protected]
Footnotes
[1] IEA (2021). Energy Storage. IEA, Paris. Available here: https://www.iea.org/reports/energy-storage
[2] See https://www.esa.int/Enabling_Support/Space_Engineering_Technology/SOLARIS/SOLARIS2
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