Value chain · CLM-0174
In plain terms
On the study's own numbers, a first space solar power system would not, by itself, earn investors the return they would expect (20%) - it would need the UK government to fund roughly half, or more than three-quarters once normal cost overruns are allowed for, of the development cost before private money would follow.
The claim as recorded
At the model's own 20% hurdle rate, the estimated internal rate of return (IRR) on the FOAK CASSIOPeiA programme ranges from 3.4% (p90) to 9.1% (p10), with mean-case IRR 7.4% (p50), and NPV is negative at every percentile (-GBP1.8bn p10, -GBP3.2bn p50, -GBP5.0bn p90); the report concludes it would be "optimal to finance approximately 50 percent of the costs" of development through central government grant to make the project viable to private investors at that hurdle rate, rising to 77% "in the presence of optimism bias."
Scope and limits
This is specific to the FOAK system only; the report's separate NOAK LCOE figures (CLM-0170) do not by themselves establish that a NOAK system would be privately financeable, since NOAK assumes four prior systems have already been built and paid for.
What it assumes
20% hurdle rate is the correct benchmark; no revenue beyond electricity sales at the assumed strike price is modelled.
Where it comes from
"The IRR could vary between 3.4% and 9.1%." (p.39; footnote markers 9 and 10 after the two figures omitted). Table 6: p10 IRR 9.1%, NPV -1.8bn; p50 IRR 7.4%, NPV -3.2bn; p90 IRR 3.4%, NPV -5.0bn (p.40). "it becomes optimal to finance approximately 50 percent of the costs through this mechanism... in the presence of optimism bias, the public funding threshold rises to 77 percent" (p.41).
Basis: percentage (IRR), GBP NPV, 2018 prices basis implied
Related records
- Answers question
- QST-039 not published in this release
Cite this
energyaperture.com/c/clm-0174
CLM-0174, Energy Aperture, as of 2021.
Connected records
Other published records linked to this one. A list, not a judgement.
- 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-0172The 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...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-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.