Main Engine Cut Off - T+25: Falcon 9 Updates and the 10% Discount

Episode Date: October 12, 2016

Gwynne Shotwell, President of SpaceX, spoke at two events and dropped some tidbits about the Falcon 9 investigation, future versions of the vehicle, and what kind of discount they would offer for “flight-proven” stages. I break down the new info, and discuss their reusability discount. SpaceX's Shotwell on Falcon 9 inquiry, discounts for reused rockets and Silicon Valley's test-and-fail ethos - SpaceNews.com Shotwell says SpaceX “homing in” on cause of Falcon 9 pad explosion - SpaceNews.com The SpaceX Discount Email feedback to [e-mail] Follow @WeHaveMECO Subscribe on iTunes, Overcast, or elsewhere Subcribe to Main Engine Cut Off Weekly Support Main Engine Cut Off on Patreon

Hello and welcome to Main Engine Cutoff, I am Anthony Colangelo and this week we're going to be diving into some updates that Gwen Shotwell, the president of SpaceX, dropped over the course of two conferences that she was speaking at over the past week. On October 5th, she was at the 2016 conference of the Asia-Pacific Satellite Communications Council, which is quite a mouthful. And on October 9th, she was at the National Academy of Engineering.

Now, in each of these, she dropped some interesting tidbits that I thought it would be good to get on here and break down, talk about what they might mean for the future of SpaceX. She did talk about what they might mean for the future of SpaceX. She did talk about some of the same things in both of these. So notably on the October 9th event,

she talked about some of the stuff that she talked about on the 5th, but expanded a bit more on it. So we're going to start there and work our way backwards. And I think, you know, we'll get into some interesting rabbit holes here as we get through some of her comments. Now, in the October 9th meeting, she did give a little bit of info on the current status of the Falcon 9 investigation. She said that they're homing in on what happened, and her quote was, I think it's going to point not to a

vehicle issue or an engineering design issue, but more of a business process issue. Hopefully we'll recover from this and be back flying a couple of times this year so what that all means is that um it's not a design issue of the booster it's not an issue of that particular vehicle or of the design of that particular vehicle or anything like that it seems like this was more of an operations issue and uh you know the business process issue is a little bit weird of a term to to describe this of event, but it sort of sounds like this was an issue with the processing that they do on the ground, the processes they take when they're filling the vehicle, the least amount of work for them to recover from this would be if it was a process issue. If they could redesign a process, that would be a quicker turnaround than if they had to redesign a vehicle or a subsystem of a vehicle or anything like that. So if this is true, and there is some information floating around out there on the Internet of what they're doing at McGregor right now, testing-wise, though it is a bit hard to come by.

there on the internet of what they're doing at McGregor right now, testing-wise, though it is a bit hard to come by. If this is true that it's a process issue, we could actually see them turn this around and get something else off the pad if they're able to assure everybody that the process issue they ran into would not happen again. We still don't really have any details on what the exact process issue is or was, or really any detail about what it may be in their process that was the issue. Was it an issue with how they're filling the tanks? The speed at which they're filling the tanks? There's so many variables there that we don't really know about, we haven't heard about, or anything like that. So we'll learn more, certainly, over the next few weeks. But if they are able to nail this down to a process issue, and it's a process

issue that they can get out of their process, for lack of a better term, if they can redesign the way they do these things to kind of limit the danger from this happening again, we could see them return to flight in November, December, you know, who knows which flight that would be, that's the return to flight, how they're doing at Pad 39A. It sounds like they didn't have that much damage from the hurricane, so they're able to carry on with the work there. But, you know, all in all, this would be the best case scenario, even though, you know, it's still a terrible situation that they're in, losing that booster and that payload. But if it is a process issue, this would be the least amount of work they'd have to do to recover from this and get back flying. So if that's the

case, I would be very excited to hear about that. And hopefully we hear more over the next week or two. You know, if they're expecting to fly in November, we're going to need to see a stage on the test stand in McGregor pretty soon and start to be shipped out to either the Cape or Vandenberg for that return to flight. So, you know, whether or not they say something, we should know soon if they're going to hit a November date, just based on the mere fact that, you know, people are looking at McGregor all the time and checking out what is on the stands there and keeping an eye on the highways going east and west out of McGregor. So we'll know one way or another whether they're going to get back flying in November.

But all signs from what she's saying there leads me to believe that we actually might see a Falcon 9 fly again this year. Now, aside from the current ongoing investigation, she talked a little bit about the reusability and refurbishment of Falcon 9 cores and what we could expect to see when they're reflying stages, how many times they're reflying stages, all that kind of stuff. So in particular, she was talking about the JCSAT-14 core. This was the one that took max damage coming back from a GTO flight. They had said that this would be the ground test article to verify any other boosters that returned,

since this was the most damage by far. And this would be a good example to use on the ground to make sure that everything's fine with that stage, so that they would have more confidence in the other stages that they were getting back with less damage. She said that they put minimum work into it to make it operational, and have at this point put it through eight full duration burns at McGregor. Half of those burns, so four full duration burns, have been at the 10% increased thrust. And that's the Merlin 1D upgrade we had heard about a few months back that they're going to be upgrading the thrust levels of Merlin again and that would be something that would start to fly next year and start to make its debut as the newest version of Falcon 9, which we'll talk about again in a second. So she said they'd feel pretty good about reflying each stage that they have right now once or twice after they get through that whole test suite on the JCSAT-14 core. So this version of Falcon 9 could refly once or twice before they'd retire it or switch to a new core. Their ultimate goal is to fly up

to 10 times, and she said that there would be an updated version of the Falcon 9 rolled out next year, which should be able to be reused up to 10 times. So presumably this version of Falcon 9 that we would see rolled out next year would have the upgraded thrust on the Merlins and probably would have some more structural work done to it to make it more reusable. They haven't said what that is yet. I would imagine it might be more heat shielding on the what they call the dance floor down by the Merlin engines, maybe some more structural support in areas that they notice were getting worn out quicker. You know, maybe even grid fins that can hold up better. We'd certainly seen the grid fins take a lot of

damage from the reentry heating. You know, we've seen grid fins come back just completely torn to shreds with holes in them everywhere. So who knows what exactly they're upgrading on that. We will probably, again, hear more information once they get through the Falcon 9 investigation. But whatever the case, that should be what they've been saying so far should be the final version of Falcon 9. And that would be the one they fly over so far should be the final version of Falcon 9 and that would be the one they fly over and over again they can fly each stage up to 10 times and it would be you know I don't know exactly what it would be but would be upgraded in some way to withstand reusability and the reused flights and you know re-entry heating and launch ascent forces all of

that stuff that goes into reflying a core, these things would be beefed up to handle all of that better and become more reliable and become reusable and really start to get them to their goals of cost reduction and, you know, full and rapid reusability. Now, the outstanding elephant in the room is the upper stage. That's the thing that we're going to throw away each flight. It seems a little bit weird that, you know, they're not putting any work into that. They're kind of focusing on the Mars stuff. Who knows how that will shake up once they get through this entire investigation, if they have any other upper stage issues. If Raptor comes along quickly and more quick than they were realizing, you know, they could try to put that work into an upper stage or something like that. But

as of right now, this would be the final version of Falcon 9 with a core that could be reused 10 times and the throwaway upper stage. We haven't heard a lot about reusable fairings in the last few months because obviously other things have been taking precedence on their workflow, but that was something that they had been commenting on over the past year. So maybe we'll hear more about that and the final version of Falcon 9 would have new reusable fairings, reusable core, and the only thing that you're throwing away would be the upper stage. Now that sort of leads us into her topics on the October 5th talk at APSCC. Now this is a great interview. I would really recommend reading the whole thing in full. She answers some great questions about whether or not SpaceX is doing

too much, which I've talked about here on the show and on the blog at mainenginecutoff.com, I think that's a bunch of crap to really pose that question. SpaceX has 5,000 employees or so, and they should have a percentage of the company looking into the future, working on things that would be relevant in the future to keep pushing themselves forward, to keep themselves relevant, to keep themselves active and pushing boundaries and doing all of that innovation that people love SpaceX for. They need a percentage of the company to do that. And having 5% to 10% of the company or whatever that number is, having that percentage of the company doing that stuff doesn't impact your day-to-day. So it's a shitty argument, to be honest about, you know, SpaceX

workflow issues, QA issues. There are issues within SpaceX, there are issues in every organization. But you know, when you have 5000 people, and you're going to start complaining that 500 or so are, you know, looking to something else, that's, that's really that starts to not hold up so well when you think about the scale that they're operating at right now. So definitely read that interview. There will be a link in the show notes to that interview, and you can kind of make a judgment of yourself based on her answers there. But the thing I wanted to get into from this interview was some of her comments about the discount that they would offer for reflown boosters. She said, quote, We are not decreasing the price by 30% right now for recovered and reused vehicles.

We're offering about a 10% price reduction. At this point, that is a reasonable reduction, and then as we recover some of the costs associated with the investment that we put into the Falcon 9 to achieve that, then we might get a little bit more. But in general, it's about 10% right now. Now, in response to this, I saw a lot of people, both journalists throughout the various space news websites and people on Twitter and a lot of people commenting on this and kind of scoffing at that.

That's saying like only a 10 percent discount. They had said 30. They had said 30 so many times, time and time again. They've said 30 percent discount, 30 percent discount. And the sentiment seemed to be that SpaceX somehow missed their mark here and can't offer a 30% reduction, rather than people realizing that this is a decision they're making to offer a 10% discount. Could SpaceX offer a 30% discount right now and still make money on the launch? Probably. Do they have any reason to do that, though? Absolutely not. You can't say in any way that they have a reason to go to a 30% reduction

when a 10% reduction still achieves their goals, lets them recoup some of that R&D money, lets them operate at a little bit higher margin as they're still working out all of this reusability stuff. And that's the part of this that I wanted to break down here. Because I think it's easy to look at this and say that SpaceX promised a 30% discount, and this is crap that they're only giving us 10%. But when you look at the numbers, 30% discount, and this is crap that they're only giving us 10%. But when you look at the numbers, both of launch prices today and launch prices over the next three, four, five years, that's where it really starts to make sense why they're doing this.

So a current Falcon 9 launch listed on their site right now is about $62 million. And based on the GPS 3 bid that we saw them win a few months ago, or however long ago that was now, government launches are about $20 million higher than that. You know, they won the bid around $80 some million. So we can sort of assume that any given government launch is about $20 million higher, or you know, 25% higher, whatever that is, 30% higher than the listed price of a commercial Falcon 9 launch. Now, a 10% discount on that would put them around $56 million, and a 30% discount off of that $62 million would put them at $43.4 million. Now, all of these are U.S. dollars.

For the international listeners out there, I'm talking U.S. dollars, and I'll be translating from Ariane 5 and Ariane 6rianne 6 prices to US dollars for this entire segment. So the Atlas 5 and the Arianne 5 are about 160 million plus per launch. Now the split launch thing for Arianne 5, that does factor into the launch price certainly. And it's important to remember that that's not a 50-50 split on the dual launch of Arianne 5. So the 160 whatever million is not split evenly for both payloads. They kind of weight it based on the mass of each payload individually. And there's some other math that goes into there. But just to give you an idea of where they're at, if you were to buy an Ariane 5 or buy an Atlas 5 or buy a Falcon 9, you're already saving about $100 million

to purchase a Falcon 9 launch. Now, if you're the smaller payload in Ariane 5, you might be able to get into that range. If you're the bigger payload, you'll still be paying a bit more than that. So if we're going to look at the launch market right now, right at this second, Falcon 9 is already way ahead on price. And when you factor in Falcon Heavy, that begins to really increase the difference there. Again, Falcon Heavy has not flown yet, so we don't know if they would actually be able to charge the $90 million they're saying for that launch, but we're just going to keep it in the Falcon 9 class here.

They're already way ahead on price. They're beating Atlas V by $100 plus million. They're beating Ariane 5 for an individual launch by $100 million. If you want to compare each payload on an Ariane 5, they're still beating them by a good margin, a couple million dollars in either case. So if you're looking at how they sell Falcon 9 launches now, this is where I'm saying there's no incentive for them to offer more than a 10% discount. In all honesty, they could start reflying cores and probably not even offer a discount for that and say, listen, you're getting a Falcon 9 launch. These things are already flight proven, as they've been loving to say over the past couple of months. They could

probably sell these, you know, at market rate and still be fine because of how far ahead they are on price. But what a 10% discount does is kind of hits both of your goals there. You know, it's great PR to be able to say that we're offering a 10% discount on reflown boosters because it's showing that you're ahead on price, you're ahead on reusability, and you're pushing boundaries in the industry. And that's, you know, we've talked before, that's what people love about SpaceX. SES and others who really believe in the SpaceX mantra of reusability, they are not paying SpaceX to work on reusability,

but they are paying SpaceX because they work on reusability. In other words, SES sees value in supporting a launch provider that is going to be working on cutting the cost of launch. So right now, that's worth it for SES to put money into. If SpaceX wasn't doing that and they were offering cheap rides, that's probably something they would still go with. But SES is even more incentivized to work with SpaceX, knowing that it might help them out greatly in the future, if the cost of launch comes way down. So the 10% discount kind of plays to both sides. It shows that you're ahead on reusability, it shows you're ahead on cost,

and it still lets you operate at much higher margins than you would if you went immediately to a 30% discount. And when you're talking about that, what benefits does it do to offer a 30% discount over a 10% discount? All it's going to do is cut into your margins. It's not going to let you recoup as much R&D money as you could at a 10% discount, and you're not going to win any additional customers away from the other players in the market at $43 million than you would at $56 million. If you're a customer who already cares about cost, you probably are signed on with SpaceX already. Now, certainly there are cases, like we talked about last week with ULA's rapid launch program, there are cases when someone who cares a lot about price might go with an Atlas 5 launch. If they really need to get something up in the next three months, they

might splurge and pay the $180 million or whatever it would be for the Atlas 5 that they need. And that would be worth it at that point in time. But if you're just generally planning out your launches over your next five, 10 years or whatever, and you care about price, SpaceX already has you. They already have you locked in almost because of that huge price difference. So that $13 million, the difference between a 10% and 30% discount, that's not going to sway any additional customers if they were already worried about price. If they're worried about reliability, or if they're worried about schedule certainty or something, and they feel more comfortable going with, you know, Arianne or eventually ULA once they start doing a lot of commercial launches, they're going to do that because that's what matters to them.

So right now, it just doesn't make any sense to go to a 30% discount. It just cuts into their margins. And, you know, then looking ahead, offering a 10% discount now leaves SpaceX a lot of headroom to cut costs in the future and to cut launch prices in the future. So as they start, you know, really working out this reusability, as they roll out that next version of Falcon 9, the one that can withstand 10 reflights, they're going to get a ton more experience with reusability. They're probably going to work out a lot of the refurbishment they need to do between launches. They're going to get better at everything with reusability. And since they started at a 10%

discount, it leaves them a lot of headroom to keep cutting costs and cutting costs. And once they hit that 30% number, and you know, they've hit their goal of cutting launch prices 30%, they're going to be so good at reusability by that point that they might start thinking about other ways to cut prices more, you know, reusable upper stages, anything else like that that would pile on top of the reusability benefits they're already getting from the Falcon 9 first stage. So they're really setting themselves up well for the future by starting off with a 10% discount. When you look at prices for the future, it gets a little murky because we don't know yet what these next generation vehicles will be launching at. We don't even know what Blue Origin is planning in both price and payload. So that's a big variable that we don't know yet about what

the launch market looks like in the 2020s. But what we do know now is that Vulcan from ULA is targeting about $100 million-ish. That's their goal for a Vulcan flight. We'll see where they come in at. The first few flights are still going to be a little expensive because they have a Centaur. They're going to have solids that are kind of expensive. There's going to be a lot of stuff there that they're still working on cutting costs, but we'll find out more about that as we get closer. In Ariane 6's case, they're targeting 80 million or 80 some million dollars for the 62 configuration, which is about 5,000 kilograms of GTO. for the 62 configuration, which is about 5,000 kilograms to GTO. They're targeting $100 million or so for a split launch on the Ariane 64. And that's kind of the same thing as Ariane 5, where it's not a 50-50 split. It's 10,000 kilograms to GTO total. So the prices there

start to get competitive when you're talking about a split launch Ariane 6. In the cases of a dedicated Ariane 62 or a Vulcan, you can see that SpaceX's discount already puts them almost at half the price of some of these numbers. The Ariane 6 split launch, that gets somewhat competitive with Falcon 9, but the other two use cases, the Vulcan and the dedicated Ariane 6, SpaceX is about half the price of either of those where we're at right now, which is four years out or four or more years out from either of those two launch vehicles flying. So it starts to get a bit tricky to compare because, you know, four years out, a lot can change for either of these launch vehicles. And when you look at the trends, the trend lines, right, Falcon 9 is getting better at reusability. And right now, though it is not proven, but I strongly believe that it will cut costs and it will cut prices. Over the next four

years, that trend line is in the downward direction. Over the next four years of building a next generation launch vehicle, you know, I challenge you to name a launch vehicle that came in on its initial launch under budget and with a lower launch price than they were planning up front. There's a tendency for launch vehicles to grow in price until their first launch and then get a little bit better over time as things get worked out, as they start to work at economies of scale and different things like that that they can do to optimize the production line. But it's tough to get the first launch of your next generation launch vehicle in a cost-cutting environment. So the trend lines for the next four years for a next generation launch vehicle

versus a reusable Falcon 9, they're sort of at odds there. And that's where it gets, you know, to me, that kind of says Falcon 9 is still going to have an advantage over the next couple of years. The big variable, again, as I said, is Blue Origin. We don't know what they're going to do yet to the market, but that would be the thing I'm most worried about if I was SpaceX. So I just kind of wanted to break that down because I saw a lot of people scoffing at a 10% discount. It just makes all the sense in the world to offer that right now and leave yourself some headroom, get the good PR, give yourself higher margins to work on this stuff more. It just makes so much sense for SpaceX to do that and still get the

benefit of saying, we're cutting launch prices by 10% with reusability. It plays to all the sides that they need it to play to with very little effort business-wise. So I want to move into some listener feedback, some emails that I got after I asked that question last week on the show. But before I do that, just wanted to say thank you, thank you so much to all of you supporting me over on Patreon. I do this show with 100% listener support. I'm not going to take any advertising or anything like that to kind of compromise my message.

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I want to get into some of the emails I got this week. Last week on the show, I said that I wanted to start getting into some more listener feedback in the show. So I asked the question for the next few weeks. We'll change the question up from time to time when there's something really interesting to talk about that I think you all have a lot of thoughts about. But this first one was focused on the SpaceX Mars

architecture announcement. I asked you for something good from the announcement. What was good in the announcement that you liked that you were encouraged to see in the announcement? Something bad that was in the announcement, something that you don't really find yourself excited about or you find yourself concerned about in the announcement. And then the big question for you coming out of the event, what was something that was about in the announcement. And then the big question for you coming out of the event, what was something that was missing in the announcement, something you're concerned that they didn't mention or you're concerned that they might overlook?

So the good, the bad, and the big question for you, send those in to anthony at mainenginecutoff.com and I'll be reading some out on the shows over the next few weeks until we switch up the question for you all. I wanna start out with Nick from Switzerland who emailed in that his good thing is he really liked how simple and integrated everything is with just one engine and one fuel. So I think he's sort of hat tipping here to some of the Falcon 9 issues they've been having

with the helium and all of that. They're going to be doing the autogenous pressurization, which will simplify the life cycle within that whole booster and spaceship combo. And the benefits of using one engine, you know, they're using different gimbling mechanisms, different nozzles for the vacuum and sea level versions, but it's one basic engine, which is going to have big impacts for them, both on the production line, the assembly line, and their actual servicing of the engines. If they need to swap one out, they can kind of have them all available. They're going to have to make 50 some of these per ship booster combo, so they're going to be needing to make a ton of these engines. It's going to be really helpful

that they can produce these all together in the same way and test them in the same way and sort of have that interchangeability that would be really, really useful when you're working with that many engines. So I like that that was his comment about what was good in the architecture announcement. Now he had sort of two questions here instead of a bad and a question. I think he was originally thinking of the first one as a bad, but it ended up being a question. So kind of listing them here as both question marks for him. His first one was that the heat shield on the ITS is massive now he's saying that they're going to get a lot of experience out of Dragon 2 both crude and red dragon missions and they currently work with the Pika X a lot with the cargo missions but they've got a lot of work to do on the heat shield

and that's certainly a good concern to have you know even even something like EFT-1 the Orion mission that that launched back in 2014 they had massive issues with the heat shield after that first mission, and they're kind of redesigning the way they're going to work with that. So I'll be interested to hear more about the heat shield as we get closer. Certainly a valid concern and something that, again, they're going to be able to work on a lot over the next couple of Mars transfer windows. So, you know, it's something that we sort of know a little bit about, but we really do need to learn more about how they're going to handle that. Now, his other big question mark was that they left out a lot of the information about power requirements for fuel production on the surface of Mars.

He said it's an incredibly important part of the architecture, and they must have already done the calculations for it. How much solar power do we need? What's the size of the fuel planet we're talking about? All of that kind of info that they left out. size of the fuel planet we're talking about, all of that kind of info that they left out. You know, Musk only kind of talked about power generation very glancingly in the presentation. He mentioned, you know, solar farms. He did mention nuclear power at one point, which I would see as the most likely since nuclear power would be very, very useful when you're talking about a colonization effort on Mars. Though I don't think you can really talk about that after everyone just

watched your booster blow up on the pad. That might stoke a little bit of fear in people's hearts when you think about, you know, putting nuclear in space or something like that. So probably more to it than just, you know, they don't want to talk about fuel production yet, but that certainly is a big question mark since that was left out of his presentation almost entirely. Now we got another email in from Andrew, and his good thing was that he was really glad that they used the good rendering in the video rather than something that was just, you know, a little bit more amateurish or something too futuristic. He said that the rendering they used made it feel much more real than, you know, you

can imagine this thing lifting off the pad and not seem like it's a hundred years into the future or something like that. Now his ban and his question were both focused on cargo, which I really, really liked what he said here. The bad thing he said was that the Mars lander does not seem designed for large cargo. If large hardware is difficult to unload, this limits habitat designs quite a bit. And I fully agree with this. This is something that I had coming out of the presentation as well, was that I really wanted to see what they had in mind for the cargo to the surface, since there's going to be a lot of infrastructure needed and stuff that doesn't necessarily fit through the doors that we saw on ITS. So this is something that I really hope that they've got a plan for and just didn't bring up in the initial presentation because they didn't want to get too off into the weeds. So, you know, in the presentation mode, I would also list it as a bad, though I might put it in the question category, since I think we will hear more about it in the future. His big question mark, again, was related to cargo. He said, with the payload

capacity to LEO that they stated, how would a large payload be deployed? There was no mention of a conventional second stage or a cargo variety that opens like a cargo plane in space. So this is sort of thinking about the booster and the spaceship as a transportation system up to Leo to maybe deploy a big space station, big satellite constellations, whatever you would be able to use all of that payload capacity for. They don't yet have plans or they didn't show plans for the payload deployment in Leo. So he's sort of worried both about deploying cargo on the surface of Mars or on the surface of other planetary bodies or in space itself. And this is definitely a big question since they're going to be needing to lift so much infrastructure,

both to orbit, when you're talking about communication systems, and to the surface of Mars when you're talking about habitats, power generation, all of that stuff that they need to build up a base there. Definitely a big question mark, and I really appreciate both Nick and Andrew writing in with their thoughts. So if you want to add to those thoughts, email me, anthony at mainenginecutoff.com. Something good, something bad, and a big question mark coming out of the SpaceX announcement. So with that, I want to thank you all for listening this week. Thank you for listening to the podcast. Thanks for reading the blog. Hopefully you'll sign up for the newsletter, check out the Patreon, subscribe on iTunes, do all the things that we want you to do with Main Engine Cutoff. Thank you.