Value chain · CLM-0172
In plain terms
The study uses a high assumed rate of return (20%) to work out the headline cost-per-unit-of-electricity figure, but uses a much lower official government rate (3.5%) when working out whether the whole programme is worth public money - these are not the same number and should not be confused.
The claim as recorded
The Frazer-Nash CASSIOPeiA model uses two different discount rates for two different purposes: a 20% hurdle rate (described as "the projected hurdle rate required by institutional investors") is used to discount cash flows inside the LCOE calculation itself, while a separate HM Treasury Green Book rate of 3.5% (for the first 30 years) is used to discount costs and benefits for the wider economic (NPV/benefit-cost) appraisal; OBR GDP deflators are used to convert nominal to real prices, and Green Book optimism bias is applied to development, capex and opex estimates.
Scope and limits
The 20% is a judgement call and the report says so itself. SRC-021 p.41: "Given the lack of a technology specific hurdle rate for space-based solar power, this study assumes a 20% hurdle rate as its benchmark estimate (and considers variations at 10%, 15%, and 25%)", and p.30 that it "is significantly higher than those used for the other technologies, to account for the low level of SBSP maturity". No observed SBSP financing transaction exists to derive it from. LCOE is highly sensitive to that choice - CLM-0170's Table 4 gives GBP 18.9-41.2/MWh at a 10% hurdle and GBP 43.6-100.9/MWh at 25%. 3.5 per cent appears in TWO roles in SRC-021 and cannot be read off it without asking which (VER-1086). It is the Green Book social discount rate for appraisal, and on p.28 it is also used as a hurdle rate for a deliberate like-for-like run against an external estimate. That does not contradict this claim, but it is the same shape as the two-rate conflation the claim exists to separate. VER-802 was superseded; the record has since been re-checked independently (VER-1086, 2026-09-05; VER-1658, 2026-10-01).
What it assumes
That the 20% LCOE rate is the study's own benchmark choice, "based on the projected hurdle rate required by institutional investors" and "agreed after extensive discussion as suitable to provide balanced comparisons with other technologies" (SRC-019 Annex B, p.5), not a rate observed in any SBSP financing; and that the 3.5% Green Book rate is used only "for discounting costs and benefits for the economic appraisal" (SRC-021 p.19-20).
Where it comes from
"A 20% discount rate is used for discounting in the calculation of LCOE... based on the projected hurdle rate required by institutional investors." "The HMT Green Book [9] recommended standard discount rate of 3.5% (for the first 30 years) is used for discounting costs and benefits for the economic appraisal." (SRC-021 p.19-20). "The discount rate used to account for the costs of capital and risks in the project is based on the projected hurdle rate required by institutional investors." (SRC-019 p.5). "The discount rate used to account for the costs of capital and risks in the project is based on the projected hurdle rate required by institutional investors. This assumption was agreed after extensive discussion as suitable to provide balanced comparisons with other technologies." (SRC-019 Annex B, p.5, verbatim)
Basis: percentage rates, not currency-denominated
Related records
- Answers question
- QST-039 not published in this release
Cite this
energyaperture.com/c/clm-0172
CLM-0172, Energy Aperture, as of 2021.
Connected records
Other published records linked to this one. A list, not a judgement.
- Also from SRC-019
- CLM-0176The launch-cost range that drives most of this study's cost uncertainty is not based on any launch that has actually happened - for...CLM-0177The cost model assumes the satellite gets cheaper to build the more of them are made, using a range that runs from the faster cost-learning...CLM-0522The UK study used a 20% return requirement, based on what institutional investors are expected to want. The US study used 3%, on a one-line...CLM-0531Neither the UK nor the US figure for what it costs to get a kilogram of hardware into the power station's real orbit is based on an actual...CLM-0539A UK consultancy, working for the European Space Agency and using the same design as its reference point, actually published a full weight...CLM-0714The 2021 UK study by Frazer-Nash Consultancy proposed that the satellite fly itself to its final orbit, using its own solar panels to run...CLM-0715The 2021 UK study assumed one extra fuel launch for every payload launch; NASA's 2024 study assumed twelve. The reason, which neither study...CLM-1430Put in 2024 money, a reliable British grid built on wind, sun and stored hydrogen would cost about 61 to 107 pounds per megawatt-hour in...More on the source page.
- Also from SRC-021
- CLM-0170A UK government-commissioned study estimates the cost of electricity from a mature (fifth-built) space solar power satellite at roughly 3.5...CLM-0171The same model shows the cost of electricity is noticeably higher for the first unit built than for the fifth, and when this study compares...CLM-0173Developing a working space solar power system for the UK is estimated to cost somewhere between about 7.5 and 16 billion pounds (in 2021...CLM-0174On the study's own numbers, a first space solar power system would not, by itself, earn investors the return they would expect (20%) - it...CLM-0175For every pound of public money put into the whole programme, the study estimates the UK economy gets back between GBP 1.30 and GBP 1.80...CLM-0522The UK study used a 20% return requirement, based on what institutional investors are expected to want. The US study used 3%, on a one-line...CLM-0538The US and UK studies are not just using different toughness levels for the same test -- they are answering different questions. The US...CLM-0714The 2021 UK study by Frazer-Nash Consultancy proposed that the satellite fly itself to its final orbit, using its own solar panels to run...More on the source page.