Updated at 9:45 a.m. EDT

TOULOUSE, France — Satellite fleet operator SES, in a decision that would have been unthinkable just a few years ago, on Oct. 15 contracted with the European Space Agency (ESA) and satellite builder OHB AG for the design of an all-electric telecommunications satellite.

The decision, which was expected given the new commitment to ESA by SES’s home government of Luxembourg, carries ESA’s Electra program through its design phase. The one-year contract is valued at 12 million euros ($16 million) and is all but certain to be followed by full Electra development.

The Phase 1 contract is financed 70 percent by ESA and 30 percent by SES and Bremen, Germany-based OHB. SES is Electra’s prime contractor for the design phase, and OHB is SES’s subcontractor. The Luxembourg government has said it plans to invest 17 million euros in the Electra program.

Depending on the speed of the follow-on construction contract, the first Electra flight, as an SES spacecraft, could occur in 2018.

SES views Electra as part of a strategy to encourage — and even act as a midwife to — new developments in satellite production and satellite launch services. For Electra, SES is acting as prime contractor for an ESA program, which is a new role for the commercial fleet operator.

Even as it signed the Electra deal, in the presence of ESA managers and Luxembourg government officials, SES’s SES-8 telecommunications satellite is preparing for a mid-November launch aboard the new Falcon 9 v1.1 rocket built by Space Exploration Technologies Corp. (SpaceX) of Hawthorne, Calif.

The SpaceX rocket has never flown to SES-8’s intended drop-off point in geostationary transfer orbit. Not so long ago, the conservatively managed SES would have refused to place a satellite on a vehicle that had never demonstrated, in flight, its ability to perform the mission. But SES has grown into a company with a nearly 50-satellite fleet, giving it in-orbit positioning flexibility that allows it to take heretofore unacceptable risks.

Similarly, SES and the Luxembourg government have been almost nonexistent from the perspective of the 20-nation ESA, based in Paris. Luxembourg’s decision at the November 2012 ESA ministerial council to invest in ESA’s telecommunications program in a big way was overshadowed by the British government’s decision to do the same thing. But Luxembourg is now a power in ESA’s expanding telecommunications directorate.

The Electra satellite will employ the Small-Geo platform, financed by ESA and the German government, being developed by OHB. Spanish commercial satellite operator Hispasat has agreed to purchase the first Small-Geo satellite in an example of ESA’s increasingly dynamic public-private partnership effort.

Electra is the latest of these.

SES Chief Executive Romain Bausch, in a statement after the Electra contract signing, said: “With ESA as an institutional partner and OHB as a technological partner, we forge a strong combination to create a new and commercially competitive satellite platform in Europe. For SES, being able to rely on all-electric satellites, in combination with innovative launch services, is becoming of primary strategic importance. … All-electric satellites are part of the key innovation roadmap identified by SES.”

Electric propulsion has been used for many years, notably by Russian satellite operators, to maintain geostationary satellites stably in orbit once they reach their assigned slots.

The new twist is to use this technology to raise telecommunications satellites from their rockets’ drop-off points in transfer orbit to final geostationary position. Up to 90 percent of the weight of conventional chemical propellant can be saved, resulting in a satellite that is up to 50 percent lighter at launch and thus compatible with less-expensive launch services.

The drawback is that it takes several months for an all-electric satellite to reach its final position and to begin generating revenue.

Boeing Space and Intelligence Systems of El Segundo, Calif., was the first satellite manufacturer to configure a commercial satellite design using this technology and has sold four satellites thus far, to be launched in pairs aboard SpaceX’s new Falcon 9. The pairing with SpaceX’s relatively inexpensive rocket was critical to sealing the four-satellite order, according to the companies involved.

Lockheed Martin and Space Systems/Loral of the United States recently introduced commercial all-electric products, and Astrium and Thales Alenia Space of Europe are readying their own all-electric commercial offers.

SES officials have said they are likely to order an all-electric satellite from Boeing but that, as in the case with launch vehicles, the company wants to assure a diversity of supply.

The company has also been involved in ESA’s effort to seek satellite owner input on the design of a next-generation Ariane 6 rocket, and has gone so far as to say it would commit to a certain frequency of use of the rocket if the design were right.

ESA governments are scheduled to meet in December 2014 to decide the way forward on launch vehicles.

Follow Peter on Twitter: @pbdes

Peter B. de Selding was the Paris Bureau Chief for SpaceNews.