THE SATELLITE POWER STATION AND NON-COST UNCERTAINTY ASPECTS OF RISK Mark M. Hopkins The Rand Corporation, 1700 Main Street, Santa Monica, California An important factor in the determination of the risk of an investment in a novel technology is uncertainty in the estimated production costs. This has been emphasized in past risk analyses of Satellite Power Stations (SPSs). But there are other important aspects of risk that have been neglected. For instance, the relative risk of two options depends on the expected cost of the energy produced as well as upon uncertainties in these costs. Thus, options which involve relatively high cost uncertainties may have less risk because of lower expected production costs. The attached figure provides prices projected to the year 2000 for alternative energy sources. The reference version of the SPS (current baseline) is risky in part because of its relatively large range of cost uncertainty. This high uncertainty is a reflection of the early stage of the program and can be expected to decrease as the program continues. A more serious problem is the risk due to the possibility that an SPS may not be able to compete with other types of energy sources. Indeed, if the graphs are taken literally there is zero chance of an SPS being competitive with coal in the year 2000. What is needed is an effort to find an alternative SPS design which shows promise of providing lower production costs. Possibilities include solid state components, lasers for energy transmission, multicolor solar cell systems, solar pumped laser satellites and the use of components built to a large extent from lunar materials. The only readily available cost comparison study of a reference SPS and a major alternative SPS design is the LRU (Lunar Resources Utilization) study by General Dynamics. The intention in using data from that study is not to advocate the LRU SPS, but rather to demonstrate that there is a reasonable possibility of the existence of an SPS approach which is obviously riskier in terms of cost uncertainties and yet at the same time has lower overall risk because of lower expected production costs. Calculations which utilize the General Dynamic data indicate that LRU SPS electricity would cost two-thirds as much as electricity generated by a reference SPS. Assuming, for illustrative reasons, that this two-third factor can be applied to the best estimate of the cost of electricity for the reference SPS in the attached figure, we obtain a best estimate for the LRU SPS option which is very near the best estimates of the cost of the least expensive alternatives in the attached figure--coal and nuclear. Hence the risk of not being competitive for this SPS option may be substantially smaller. If the SPS RDT&E program is run by a governmental agency, such as DOE or NASA, then there will be risk with respect to these agencies, which in general is not the same as risk with respect to society—the type of risk which was of concern in the preceding. Indeed, the net advantages of the high technology--high uncertainty--low production cost approach is often greater for such organizations. Their crucial source of risk is not cost uncertainties, rather it is the possibility of program cancellation (due to lack of economic viability) after a large amount of money has been spent purchasing such items as the first SPS. The political repercussions of a program cancellation under such circumstances for an agency such as NASA could be enormous. The SPS and fusion concepts have many similarities. Both involve high technology, large centralized power sources, and the potential of providing almost all of our energy needs far into the future. The fusion program does not currently have a reference design which is economically feasible. The
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