Prepared Statement

To be delivered September 7,
2000, to the U.S. House of Representatives,

Subcommittee on Space and
Aeronautics, Committee on Science

Dr. Molly K. Macauley

Senior Fellow

Resources for the Future

An Economics View of Satellite Solar Power

Chairman and distinguished members of the subcommittee, thank you for inviting
me to meet with you today. My name is Molly K. Macauley and I am a Senior
Fellow at Resources for the Future, an independent, nonpartisan research
organization established in 1952 to conduct independent analyses of issues
concerned with natural resources and the environment. The views I present today are mine alone. Resources for the
Future takes no institutional position on legislative, regulatory, judicial, or
other public policy matters.


am an economist and have been a member of the Resources for the Future staff
since 1983. During that time, I have
specialized in the analysis of space policy issues with a focus on
economics. I have conducted research on
space transportation and space transportation vouchers; economic
incentive-based approaches, including auctions, for the allocation of the
geostationary orbit and the electromagnetic spectrum; the management of space
debris; the allocation of resources on space stations; the public and private
value of remote sensing information; the roles of government and the private
sector in commercial remote sensing; and the economic viability of satellite solar
power for terrestrial power generation and as a power plug in space for
space-based activities. This research
has taken the form of books, lectures, and published articles. My research is
funded by grants from the National Aeronautics and Space Administration (NASA)
and by Resources for the Future (RFF).


have been asked to speak today about the economics of space solar-power
generation (SSP). My comments are based
on recently completed research sponsored by NASA and conducted with experts
from the energy industry. NASA asked us
to look at SSP economics around 2020, when many space experts expect SSP to be
technically achievable. It is important to note that our purpose was
neither to advocate nor to discourage further investment in SSP but to provide
a framework by which to gauge its economic feasibility if such investment

daunting task was to characterize the market for electricity during that future
period. We were to identify key challenges for SSP in competing with
conventional electricity generation in developed and developing countries,
discuss the role of market and economic analysis as technical development of
SSP continues in the coming years, and suggest future research directions to
improve the understanding of the potential economic viability of SSP.

listed my coauthors at the end of my remarks, as well as other experts with
whom we met to discuss specific aspects of the SSP market. These included
experts in epidemiology and public health; the economics of the environmental
and climate change-related effects of energy use; energy and national security;
nuclear power (for lessons learned in introducing new energy technologies); and
energy investment in developing countries.

also like to add that our study was funded by NASA but the Agency gave us full
liberty to carry out an independent course of study and publish our results. We
have presented our findings to NASA managers and technologists working on SSP
and many of our recommendations have been acted upon.

Summary of our Study

solar power (SSP) has been suggested as an alternative to using terrestrial
energy resources for electricity generation. 
In our study we considered the market for electricity from the present
to 2020, roughly when many experts expect SSP to be technically achievable. We
found that a variety of trends from the present to 2020 should influence
decisions about the design, development, financing, and operation of SSP. An important caveat associated with our
observations concerns the challenge of looking ahead two decades. We based our observations on what we believe
to be plausible estimates of a number of key indicators derived from the work
of respected national and international research groups, the information and
perspectives shared by the experts whom we consulted for the study, and our own
judgment. While we believe this
information is a valid basis for considering the competitive environment for
SSP, we urge our audience to appreciate the pragmatic process and somewhat
intuitive elements involved in their estimation. In what follows, I summarize our study. The full study is
available at

first set of observations concerns the market for electricity, in particular
the key attributes of this market that are most relevant to investment in SSP:

The Market for Electricity

  • Current trends indicate increasing global demand for energy in general,
    and electricity in particular, during this period. Electricity demand growth
    rates will vary significantly by region of the world and by stage of economic
    development. The highest growth will be in developing economies.

  • Deregulation of electricity internationally will strengthen the trend
    towards decentralized, private ownership and management of utilities in most
    countries (developed and developing)˜a major departure from the tradition of
    nationalized utilities in many countries.

  • Nevertheless, investment in and operation of conventional electricity
    markets in developing economies likely will continue to be, or will be
    perceived as risky due to capital constraints, infrastructure limitations, and
    institutional and environmental factors.

  • Constant-dollar electricity generation costs in 2020 likely will be no
    higher than prevailing recent levels and very likely will be significantly

  • The monetary value of environmental externalities in electricity
    generation appears to be significantly less than some studies have indicated.

  • Global climate change is not presently a major factor in power investment
    decisions in developing countries. 
    Willingness to pay for “clean” technologies tends to rise with
    increasing incomes, but in developing countries, clean energy may not be
    highest ranking among health and environmental concerns.

  • Resource constraints on fossil fuels are unlikely to be a factor in
    this timeframe, other than possible short-term supply disruptions caused by
    political and economic factors.

    together, these observations suggest that conventional electricity generation
    in both developed and developing countries may be more than adequate in terms
    of (1) cost, (2) supply, and (3)
    environmental factors.

    second set of observations pertains specifically to challenges facing SSP:

    Challenges for SSP in Competing
    with Terrestrial Electricity Generation

  • The relative immaturity of the technologies required for SSP makes it
    difficult to assess the validity of estimated costs and likely competitiveness
    of SSP. For this reason, as in many
    space development initiatives, orders-of-magnitude reduction in the costs of
    space launch and deployment and other key technologies is critical. If these reductions occur, the economic
    viability of SSP would become more promising. 
    Until then, it is premature for the U.S. government to make commitments
    such as loan guarantees or tax incentives specifically for SSP.

  • State-of-the-art conventional power generation technologies
    increasingly incorporate numerous environmental controls, eroding somewhat the
    environmental advantage of non-fossil-fuel technologies such as SSP.

  • Actual and/or perceived health risks associated with exposure to
    electric and magnetic fields generated by SSP are likely to be of significant
    public concern.

  • National security and national economic considerations may discourage
    some countries from participating in an SSP system operated by another country
    or group of countries. Countries with
    these concerns may require equity participation in SSP, limit their reliance on
    SSP only to a small share of their energy portfolio, or decline use of the
    technology altogether.

    findings argue for the merits of furthering technical advance in technologies
    required not only for SSP but also for other space activities, and for special
    consideration of issues that transcend the technical design of SSP, such as
    health and national security concerns.

    also urged that economic study continue hand-in-hand with SSP technical
    design. During the course of our study,
    we shared our interim findings with the engineering teams working on SSP. All parties agreed that this interchange of
    ideas was mutually beneficial and contributed markedly to deepening our
    collective understanding of next steps for both the technical team‚s
    engineering studies and our economic analysis. 
    The two must proceed in tandem, we all agreed, and specific
    recommendations as to further economic and market studies follow:

    The Role of Economic and Market
    Analysis as Technical Considerations of SSP Progress

  • The energy industry should be invited to be „at the table‰ in technical
    and economic analyses of SSP — that is, to both participate in conducting the
    analysis and learn about the results. 
    The electric utility industry may be particularly interested in helping
    to guide the development of SSP technical components that are also capable of
    application in other terrestrial commercial power markets (for example,
    development of solar cells).

  • Modeling of the economics of SSP should explicitly incorporate analyses
    of risk and uncertainty; include marketplace data about competition from terrestrial
    energy markets; and provide a means for structuring an efficient long-term
    technology development program that includes industry participation.

  • Continued public funding of SSP for terrestrial power markets must
    consider the relative return on taxpayer investment in SSP compared to other
    technologies, in general, and energy technologies, in particular (for instance,
    photovoltaics). It should be noted that
    some past projections of large market penetration of new power generation
    technologies have not been borne out by actual experience (for example,
    nuclear, solar).

    we identified specific topics for future research:

    Issues for Further Study

  • Our focus in this report is on the use of SSP in terrestrial
    markets. SSP capabilities may have
    applicability to non-terrestrial systems such as the International Space
    Station, other large orbiting platforms, lunar bases, and other activities to
    explore and develop space. The benefits
    and costs of these opportunities should be investigated in the course of future
    SSP analyses.

  • Real as well as perceived, safety, health, and environmental risks
    associated with SSP in both its terrestrial power and nonterrestrial power
    markets should be assessed and discussed in public forums, engaging both scientists
    and the public.

    Additional Observations

    like to conclude my comments by elaborating on several of our study’s
    conclusions and making some additional observations relevant to our discussion

    study did not consider the idea of satellites designed to relay power from
    earth-based generation facilities, but some of the findings in our study might
    be useful in discussion of that application of SSP.

    cost of power in 2020

    study predicted the cost of U.S. electricity generation costs around the year
    2020 — a challenging task, but one to which we brought the best information
    and analysis that we could find. This estimate can be used as a benchmark for
    the relay concept: if it were to come
    on line in 2020 or so, can it provide electricity at less than this cost? If
    so, it could be economically competitive. 
    The estimate is around 3 cents per kilowatt hour in developed countries,
    and around 5.5 cents per kilowatt hour in developing countries.


    found that the environmental costs of electricity generation tend to be smaller
    than popular discussion suggests. Issues of pollution, deforestation, and
    global warming are receiving growing attention by the world community. However, cleaner forms of energy have been
    introduced into both the developed and developing world in numerous initiatives
    to ameliorate these problems, and some governments in developing countries have
    already have begun to use renewable energy technologies as a tool of economic
    development. Recent studies suggest that the damage, or social cost, of
    electricity generated by conventional means may be relatively small,
    particularly for the noncoal resources likely to figure increasingly in future
    capacity additions to electricity supply. 
    The estimate of the social cost is about 2 cents per kilowatt hour.

    prices, brown outs, running out of oil

    The question, "are we running
    out of oil?," has been a concern for at least the last 100 years. During the first half of the twentieth
    century, analysts and officials of the U.S. Geological Survey predicted an
    exhaustion of U.S. oil reserves within 10 to 20 years. Since then, there have been other alarming
    studies about depletion, but time and again these have proven wrong. They fail to distinguish between proved,
    recoverable reserves and discoverable resources. Technological change, including three-dimensional seismic
    exploration, horizontal drilling, and deeper drilling in the oceans has led to
    production prospects that were not predicted twenty-five years ago.

    The brown-outs over the past year in
    the western U.S. have been attributed
    as much to inadequate management of fuel supplies and transmission capacity as
    to shortages of fuel. The brown-outs were regional, not nationwide, suggesting
    that there is no overall shortage but that transmission and distribution are
    part of the challenge. In addition, the electricity industry estimates that
    about 30,000 megawatts of additional power could be on line by 2010 if plant
    constructions that have been announced take place.

    Gasoline and home heating oil prices
    have soared this year — but this is only the fourth time in over thirty years.
    The price of oil now — about $30 a barrel — is nowhere near what it was in
    the early 1980s, say, when the inflation-adjusted price was about $70 in
    today’s dollars. The high gas prices have hardly affected the sales of
    low-mileage auto models like sports utility vehicles and gas consumption is
    still rising. The high prices were an annoyance
    for many consumers and a hardship for some low-income families who depend on
    oil to heat their homes. But for the
    country as a whole, they have not constituted a real economic crisis and they
    are now declining. For the future, from
    time to time, unexpectedly, the world’s oil market will swing price
    dramatically up, but also down.


    perceived risks of dependence on imported energy could lead to support for
    policies of greater self-sufficiency, leading in turn to higher electricity
    costs or alternative sources of energy. 
    This question may present a rather unique challenge in the context of an
    SSP regime. A country may not want to be reliant on another country’s
    space-generated power for a significant portion of its baseload electricity. It therefore may look to equity
    participation in SSP, seek other means of protecting itself against the
    potential discontinuity of external supply, or possible reject SSP out of hand.

    in developing countries

    issue that may arise in the application of SSP in developing countries is the
    perceived risk associated with investing in these countries. The risk relates
    to unstable governments, economies, and currencies.

    in power supply

    as SSP represents a potential innovation in electricity supply, so, too, are
    new technological approaches being developed with which SSP would have to
    compete. An example is micropower, small local power plants that do not suffer
    huge transmission losses. Micropower may be most useful in developing countries
    as an alternative to building large transmission grids.

    hope these observations are useful in our discussion today, and thank you for
    the opportunity to meet with you.

    Authors and Experts Consulted

    The study team for our SSP report included RFF scholars
    and experts from the energy industry. Listed together with their affiliations
    at the time of the study, they are:

    Joel Darmstadter, Resources
    for the Future

    John N. Fini, Strategic
    Insight, Inc.

    S. Greenberg, Princeton Synergetics, Inc.

    Molly K. Macauley, Resources
    for the Future

    John S. Maulbetsch, Energy
    Power Research Institute

    A. Michael Schaal, Energy
    Ventures Analysis, Inc.

    Geoffrey S. W. Styles,
    Texaco, Inc.

    James A. Vedda, Consultant

    During the study,
    the authors met several times with other experts to discuss specific aspects of
    the SSP market. We are grateful for the
    information and viewpoints shared with us in briefings by these individuals:

    John F. Ahearne, Sigma Xi (formerly with the U.S.
    Nuclear Regulatory Commission)

    Jan A. J. Stolwijk, Department of
    Epidemiology and Public Health, Yale University

       School of Medicine

    Gary Payton, U.S. National Aeronautics and Space

    Dallas Burtraw, Resources for the Future

    Michael A. Toman, Resources for the Future

    James Bond, The World Bank

    Yves Albouy, The World Bank