Will DARPA's New Space Shuttle Crush the SpaceX Grasshopper?

This experimental space plane promises to drop the price of satellite launches tenfold.

Aug 3, 2014 at 10:01AM

Darpa Space Plane
DARPA's hypothetical "space plane." Photo: DARPA.

SpaceX wants to put American astronauts back in space aboard American-built rockets powered by American-built rocket engines.

But will the American government give the company the chance?

SpaceX recently accomplished a successful "soft" landing of a Falcon 9 rocket that had delivered its payload to space, then returned safely to Earth. (As planned, it landed on a patch of "Earth" that was actually water and promptly sank.)*

SpaceX hopes to turn the Falcon 9 into the next stage in evolution of the company's revolutionary "Grasshopper" vertical takeoff and landing space rocket. Dubbing the next stage in the Grasshopper experiment, the Falcon 9R ("R" for "reusable"), SpaceX's ultimate goal is to build a rocket ship that can launch into space, deliver its satellite payload, then drop back down through the atmosphere and land vertically on its launch pad. If the company succeeds, it will give the U.S. government its first truly reusable spacecraft since the cancellation of the space shuttle program.

SpaceX's Grasshopper: Small, but with big potential. Photo: SpaceX.

The bigger question is whether the U.S. government will want it.

DARPA steals SpaceX's thunder
A reusable spacecraft holds the potential to save taxpayers billions of dollars in costs by not having to build disposable spacecraft for each new satellite launch. But the Pentagon's Defense Advanced Research Projects Agency is already working on its own idea for a reusable spacecraft.

Dubbed the "Experimental Spaceplane," or XS-1 program, the new spacecraft would actually work more as a suborbital space shuttle. Operated remotely like a drone, and flying at speeds in excess of Mach 10, XS-1 would lift small payloads into the stratosphere, then fire them into orbit via a small, disposable, "upper stage" rocket. The XS-1 would then fly back down to Earth to land just like a plane would.

DARPA thinks that if it can get this concept up and running, it should be possible to deliver small satellites (1.5-2.5 tons) into orbit at a cost of about $5 million apiece. That's 10 times less than the $55 million that SpaceX charged SES for one satellite launch last year aboard its (currently disposable) Falcon 9 rocket. In fact, $5 million would almost certainly be cheaper than what SpaceX could charge even with a reusable Falcon 9.

As such, DARPA's XS-1 project has the potential to undercut SpaceX's pricing and smother its reusable spacecraft project in the cradle.

Who benefits?
DARPA has hired three teams of space industry contractors to do initial design work on XS-1:

DARPA has not revealed how much it will pay the contractors to begin work on XS-1 -- much less how much they might earn from contracts to actually build the craft, should the program proceed that far. But the latter amount (at least) is likely to be substantial, and SpaceX is not even in the running to win it.

Who gets hurt?
SpaceX, certainly, has a lot at stake if DARPA's XS-1 program succeeds. A viable XS-1 could quickly make the company's reusable Falcon 9 program look obsolete -- and expensive. What might surprise you, though, is that the biggest casualty of a successful XS-1 program might not be SpaceX, but Boeing -- one of the companies that might win the DARPA project.

As one half of the government-supported United Launch Alliance (which also includes Lockheed Martin), Boeing benefits mightily from the current system of sending satellites into orbit aboard disposable spacecraft. These launches cost the government -- and taxpayers -- about $10,000 per pound of payload delivered into space. But if XS-1 can move 5,000 pounds. into orbit for just $5 million, that works out to just $1,000 per pound -- a tenfold reduction in cost and a tenfold reduction in space launch revenue for Boeing (and Lockheed Martin).

What goes up, must (drive prices) down
That's could be a big hit to Boeing's business. But at least if it builds DARPA's space plane, Boeing will still retain some revenue from the space launch business. The alternative is to not build XS-1, to allow SpaceX to put Falcon 9R into service unchallenged, and, slowly but surely, to get priced out of the space launch business. For Boeing, that's simply too big a risk to take.

*Editor's note: A previous version of this article was misleading about whether the SpaceX rocket's "wet landing" was intentional or accidental. The Motley Fool regrets the confusion.

Darpa Space Plane
XS-1 could leapfrog SpaceX in the race to space. But whoever wins, the price of "space access" is coming down. Source: DARPA.


Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com, Lockheed Martin, and Northrop Grumman. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information

Compare Brokers