New Synergies to Strengthen European Space

New Synergies to Strengthen European Space

Today, many new opportunities are beginning to unfold in the global space economy. One area where they are growing rapidly is in the European Earth Observation industry. But where exactly do these opportunities lie? And what does the future hold?

Today, satellite-based Earth Observation (EO) technology and applications are ubiquitous — they are being visibly demonstrated and implemented in all corners of the world. Earth Observation has now entered a new dimension, with the digital sector investing massively in the space sector, giving the latter attention, credibility, and funding. Around the globe, countries are investing heavily in space, having woken up to the immense economic and societal benefits that EO promises.

The European space industry is the second largest in the world, supporting the economies in the region and facilitating Research and Development and Innovation (R&D&I) by fostering new and emerging technologies. According to the Council of the European Union (EU), the European space industry, which includes manufacturing and services, currently employs over 231,000 professionals and is estimated to be worth USD 53.12 to USD 62.14 billion. The European Space Agency (ESA) estimates that for every Euro spent, there is a benefit worth six Euros to society and job creation.

When it comes to EO applications in particular, the EU Agency for the Space Programme’s EUSPA EO and GNSS Market Report ISSUE 1 states that the global revenues of EO data and value-added services are set to double from roughly USD 2.81 billion to over USD 5.51 billion over the next decade. Together, US and European companies hold over 83% of the global market, each accounting for over 40%. The remaining market is distributed around the rest of the world.

New space program

In April 2021, the Council of the EU and European Parliament adopted a regulation establishing the new EU Space Programme for 2021-2027. The program entered into force retroactively from January 1, 2021. Supported by a whopping USD 14.91 billion budget, the EU Space Programme bolsters the European space industry and promotes the emergence of a European NewSpace ecosystem, fostering entrepreneurship, innovation, and new funding opportunities. The vast majority of the money, USD 14.46 billion, has been set aside for Copernicus, Galileo, and EGNOS (European Geostationary Navigation Overlay Service). The increased budget underlines EU expectations for space as an economic enabler, with a positive spillover effect across various industries.

While striving to strengthen existing European space assets and services, the program also targets startups and SMEs, which develop innovative solutions based on space technologies, data, and services. It is implemented closely with the EU member states, EUSPA, ESA, European Organisation for the Exploitation of Meteorological Satellites (EUMETSAT), and many other stakeholders.

There is no doubt that these numbers and ambitions speak of a new era unfolding in the European EO industry. Opportunities now abound for everyone to take part in the global space economy. But where do those opportunities lie? And what might the future hold?

“Space is going through a massive transformation and rapid industrialization worldwide. For Europe to maintain its leadership, we must rethink how we do space. We must adapt to fast developments and anticipate new ones. I want to be clear: we cannot proceed with business as usual. Defining the future of Copernicus will be one of my priorities for the months to come.”

– Thierry Breton
EU Commissioner

The influencers

The European EO downstream market has evolved rapidly over the past decade. Most customers of EO products and services are in the public sector. The 2021 EARSC (European Association of Remote Sensing Companies) survey of the European EO services industry found that 52.4% of revenues came from public sector sources. Another 29.2% of revenues came from the private sector, while 7% came from international organizations. However, the market is relatively fragmented by sector.

Defense and security is the sector producing the most turnover by far, and at more than 32%, agriculture and environmental monitoring each account for over 10% of sales generated. The latter two market segments, as well as others such as forestry and urban monitoring, are of most significant relevance from the perspective of the EU Space Programme, as Copernicus provides EO data to support these sectors.

Far from being a slogan, the burgeoning ecosystem called NewSpace is a concrete phenomenon influencing the European region, where a profound transformation of the space landscape is taking place, maturing, and being shaped by new actors. The commercialization of the space sector has given rise to a new generation of space companies developing innovative and affordable solutions to access space.

“The EO industry is in the middle of a perfect storm. The NewSpace approach in manufacturing provides no continuous testing, custom devices, and shorter Earth-to-space time. This paradigm disrupts the traditional space value chain and puts a solid competitive edge on traditional Large System Integrators. Smaller satellite, firstly, means lower launch cost; shorter time of deployment means lower cost of deployment; numerous constellations (mainly in low Earth orbit) means better resolution in revisit time and geometry,” says Giovanni Sylos Labini, CEO, Planetek Italia Srl.

He further explains that the increasing digital component also substantially impacts the downstream segment of the value chain: the increased commoditization of data; lowering the cost of HPC (high-performance computing); growing onboard processing capabilities; and shift from the human user to the machine user. This evolution will dramatically change the positioning of the EO downstream industry. Furthermore, a growing interest exists in exploiting Earth Observation data as a source of readily available information about natural phenomena.

Disruptive technologies, such as, artificial intelligence (AI), machine learning (ML), IoT, Big Data, and Cloud have been around for quite some time. They are game changers and central to the fastpaced development and growth in adopting EO data.

“A good information service is always a combination of all different data sources. Cloud technology is proving to be one of the essential ingredients of a collaboration between different partners. It brings different data sources on centralized archives, making it easier to partner with a company,” says Dr. Manfred Krischke, CEO of CloudEO.

Seb Lessware, Chief Technology Officer, 1Spatial, agrees: “If we use Cloud services, we can plug different data sources together very easily and get to work together. It’s bespoke and makes it a lot easier to get to interoperate different services.” He further explains that it is useless to reinvent the wheel: “Instead, we can make the best use of Cloud services provided by Microsoft, AWS, or Oracle.”

“Europe has firmly decided to step up its ambition in space, to reflect its political and economic standing, and to take a leading role in the global space community.” –

Simonetta Cheli
Director of Earth Observation Programmes, ESA

Polished policies

This June, the European Commission published draft legislation, which, if enacted, will boost the reuse of public sector open data. The new proposal offers guidelines for EU member states to publish publicly-held, high-value datasets for reuse.

The new proposal will harmonize the technical, legal, and granular specifications for how member states publish data sets from six categories with high socio-economic potential: geospatial, EO and environment, meteorological, statistics, companies and company ownership, and mobility data. However, the initiative, like its predecessors, is still limited. The Commission should go further, eventually making publicly held data open by default, and only narrowly limiting public sector data.

“The open and free data access of Copernicus data is a mandatory policy to spread EU Earth Observation capabilities for the benefit of the citizens in Europe and worldwide, but this policy should also be sustained by the EU demand that can make it easier for our industries to compete on a global scale,” cautions Sylos Labini.

In another step in Brussels on January 25, 2022, and in the context of the CASSINI Space Entrepreneurship Initiative, the European Commissioner for Internal Market signed a joint statement, together with the Vice-President of the European Investment Bank and Chief Executive of the European Investment Fund, officializing their joint commitment for the CASSINI Seed and Growth Funding Facility. The objective of CASSINI — a EUR 1
billion space investment fund — is to attract more venture capital (VC) funds to become active investors in European small and medium-sized enterprises (SMEs) developing space technology and digital services using space data.

“CASSINI hackathons have generated considerable interest in space innovation. We are keen to see the results of matchmaking and access to financial objectives, which will boost startup and SME innovation in SpaceTech,” opines Ajay Goyal, Founder & CEO, ForestSAT AS, Norway.

CASSINI is a successful initiative that can help new risky ideas find patient funding. But, there is apprehension that without proper regulation (a sort of EU Space Act) and a trade agreement with US, which opens US market to the European industry, the long-term development of this initiative can fall short with respect to investor expectations.

The regulation establishing Horizon Europe, the new framework program for R&I from 2021-2027, was adopted in April 2021 with a total budget of USD 86.29 billion at current prices. The program is structured in three pillars: Open Science, Global Challenges and Industrial Competitiveness, and Open Innovation. Space comes under the cluster ‘digital and industry’ of the second pillar, which has a proposed envelope of USD 13.53 billion and an additional USD 1.35 billion from NextGenerationEU.

Horizon Europe also funds R&I for the New Space Programme of EU. Horizon Europe is a great R&D program, essential for developing early-stage activities and favoring continental cooperation. However, there is still a lack of agility with respect to the accelerating pace of innovation in space. NewSpace, VC, and private equity-backed companies, among others, can hardly cope with planning requirements from these instruments.

European Space
Source: European Commission, European Investment Bank, European Parliament

Hurdles in space marathon

The European Union, European Commission, ESA, EUSPA, and member states are optimistic about the future of the EO market with emerging new verticals, albeit it is not wholly free from potential complications. Despite the crucial applications that the downstream EO sector provides, its potential is still undefined. When assessing manufacturing in the space sector, downstream EO is not even considered in this classification.

The reason is that its boundaries are not well defined and the downstream players lack awareness. Currently, there is no European legislative framework for the downstream market.

“There is a striking gap between the potential impact of EO data and the consideration of EO data in regulations. Due to its scalability and minimum manual effort in processing data, EO could, in many cases, be the most reliable, objective source of truth. Regulations lack in accounting for this and thereby reinforce the information discrepancy between the amazing innovations in the space sector and the actual knowledge of these possibilities in the wider industry and members of the public,” says Dr. Lina Hollender, Chief Commercial Officer, ConstellR GmbH.

The new proposal will harmonize the technical, legal, and granular specifications for how member states publish data sets from six categories with high socio-economic potential: geospatial, EO and environment, meteorological, statistics, companies and company ownership, and mobility data.

Barriers to commercialization of the EO sector

Accessing capital
This is much more difficult in Europe compared to the US. Investors tend to be reluctant and investment volume is often only a fraction compared to US investment. Programs like the European Innovation Council (EIC) Accelerator, which provide equity investment and require startups to raise an identical amount of money from private investors, are a good step in the right direction.

Lack of commercial acumen

Space companies are often spin-offs of research institutions. They usually come as teams of brilliant scientists and tech experts, yet with a complete lack of experience in the private sector. The latter is crucial in a) understanding private industry actors and designing solutions tailored to particular use cases, and b) genuinely scaling the companies. Ideally, programs and incubators need to match founders from institutions with people from the private sector.

Effort to educate customers

There is a huge gap between existing and future solutions from the space sector and the knowledge of these across various industries. There is a need to bridge this gap by speaking more about space in the media. For many verticals, this also means considering very long sales cycles with customers who may not be very experienced in understanding the value of EO solutions.

Although European firms are competitive with innovations that have impacted the space industry, this has rarely translated into a commercial advantage within the European space sector. “These include challenges in accessing capital, lack of commercial acumen in typically tech-heavy teams, and the underestimated effort of educating customers,” adds Dr. Hollender.

European space startups and companies have been lagging in commercial competitiveness and innovation compared to the United States, Israel, China, and India. Goyal is, however, hopeful that “the scientific and research-based foundations in Europe are stronger than in any other market and commercialization through open science, open data and innovation funding can result in very fast-paced growth in the European Union.”

European space startups and companies have been lagging in commercial competitiveness and innovation compared to the United States, Israel, China, and India.

The way forward

The European space industry, in general, and the EO industry, in particular, are exposed to global competition, mainly from the US and China. The industries of these countries are primarily sustained by their respective governments. At the same time, the EU and member states have significant investments in the upstream segment; the government anchor tenancy demand is relatively weak.

The EU should change this by establishing a long-term stable demand to ensure the industry’s resilience, and encourage private investment to help in consolidation and worldwide competition.

“The EU, ESA, and the member states are evolving their approach in the right direction, pushing for commercialization and considering extending regulation that favors EO use. Also, the action for Green Deal and Digital Transition helps move EO from the area of supply side (DG-Efis) toward a more demand-oriented Directorate like DG-Environment, DG-Connect, and the DG-INPA for international cooperation action. The clear message of ESA agenda 2025 also favors a more agile and innovation-driven commercial EO future,” says Sylos Labini.

With the fierce competition across sectors and applications, Dr.Hollender expects industry consolidation to happen over the following years. Planet acquiring VanderSat, and Constellr acquiring ScanWorld, are good examples of such a consolidation. “Moreover, taking into account the limited availability of public funding and a solid number of space companies, I would accept one or two ‘European champions’ to emerge over the next couple of years, that is, firms backed by institutions and strategic investors to advance European leadership in the space sector,” she says.

Earth Observation data and services bring value to what humans do on Earth. And it is tough for a service provider to control everything. “I am a great believer in partnerships; for example, you need to be regional with an agricultural application. You cannot do it from a central place and develop that market. I think the real thing is to a healthy ecosystem where everybody is working together,” says Dr. Krischke.

In her closing remarks at the recently held Living Planet Symposium 2022, ESA’s Simonetta Cheli, Director of Earth Observation Programmes, said, “Europe has firmly decided to step up its ambition in space, to reflect its political and economic standing, and to take a leading role in the global space community.” What has become clear is that the European EO sector fully embraces the digital revolution, tackles urgent societal challenges such as the climate crisis, and puts forward ambitious initiatives for the European Green Deal.

However, the sector has not yet fully become mainstream or realized its potential. Greater awareness and de-mystification of the sector are crucial and policymakers and industry need a better understanding of the progress in EO solutions.

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