Annexes to COM(2013)108 - EU space industrial policy - Releasing the potential for economic growth in the space sector

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dossier COM(2013)108 - EU space industrial policy - Releasing the potential for economic growth in the space sector.
document COM(2013)108 EN
date February 28, 2013
agreements and trade negotiations can contribute to ensuring a "level playing field" for the European space industry at international level, provided EU has a strong enough stand in international negotiations. The Commission has therefore recently adopted a proposal on access of third countries to the EU's public procurement market[29]. If adopted by the Legislator, this Regulation would to improve the conditions under which EU businesses can compete for public contracts in third countries, by strengthening the position of the European Union when negotiating access for EU companies to the public procurement markets of third countries, in order to open up our trading partners’ markets, and by improving, in line with the EU’s 2020 strategy, business opportunities for EU firms on a global scale, thereby creating new jobs.

More generally, international cooperation should also serve as a market opener for the promotion of European technology and services in the space field and help strengthen this strategic industrial sector. The EU must ensure that space-related matters are better integrated into the Union's external policy.

4.2.        Supporting Research and Innovation

Research, development and innovation not only are key elements of space industrial competitiveness, but also essential ingredients of a sustainable economic growth, be it in the short run as in the long run, with effects on the ability of the European Union to remain competitive in an increasingly globalised economy. The budget for Space under Horizon 2020 (the successor of FP7) is proposed to be 1737 million euro in current price (1548 million in constant 2011 price) for 7 years. Space in Horizon 2020 will cover R&D and innovation with the objectives to:

· Enable European competitiveness in space, non-dependence and innovation in space activities, focussed on industrial R&I, emphasizing SMEs;

· Enable advances in space technologies, ranging from basic technology research to close-to-application technologies for future generations of Copernicus/GMES and Galileo satellites;

· Full exploitation of space data, including data from scientific missions and commercial applications of space data;

· Enable European R&D in the context of international space partnerships (e.g. ISS, SSA, global robotic exploration programmes).

Concerning the latter, cutting edge space technology is increasingly taking place in international frameworks, making access to such programmes an important success factor for the competitiveness of European researchers and space industries.

4.2.1.     Enable European competitiveness in space worldwide, notably by ensuring European non-dependence in critical technologies and by fostering innovation

The objective is to maintain a globally leading role in space by safeguarding and developing a competitive space industry and research community and by fostering space-based innovation.

First, the survival of a competitive commercial industry in the space sector in Europe and the capability for European institutional customers to implement their missions require a decrease in European technical dependence on non-European countries. It is of utmost importance to identify which technologies are critical and to ensure that for these Europe develops and maintains its own technology solutions and production capacities. Once the technology has been developed, it should be used consequently by institutional actors and European industry. Otherwise, it will be lost.

The European Commission, together with ESA and EDA have created a joint task force with the aim of producing a coherent list of critical technologies for priority development. This joint European non-dependence process has started in 2009. A list of urgent actions has been agreed upon and used as the basis for the FP7 4th Call on critical technologies. This initiative should be pursued.

Secondly, satellite enabled products and services constitute an emerging market and remain limited and fragmented. At this stage of development, they still depend to a large part on public customers at national and local levels. Incentives for new markets using space based services have been created in the US due to a long term policy of promoting governmental use which created a virtuous circle by boosting private businesses that need in turn more space based infrastructures. These initiatives boost the use of space for the benefit of public policies and make these companies more competitive on export markets. It should be assessed whether similar incentives can be provided to European industry.

In order to promote the exploitation of satellite infrastructures and develop the market for satellite based services, the EU should increase the promotion of space-based applications in EU policies. The creation of new applications needs to be stimulated across a variety of potential public and private users including new user communities (cities, regions, various industrial sectors, etc), notably through ad-hoc take up actions, such as vouchers for local authorities or SMEs, to facilitate the adoption of new services by the final users. Their development and deployment, often by SMEs, need to be supported on a consistent basis to ensure sustainable effects on qualified employment.

More specifically, the full innovation potential created by the new European space infrastructures also needs to be supported. The Commission GNSS Action Plan to foster the development and adoption of satellite navigation applications using EGNOS and Galileo is a first step in that direction.

There is need for a much stronger effort, coordinated at European, national and local level. This requires the deployment of a whole range of innovation support measures[30] to industry with a specific focus on SMEs. However, in order to address this market failure, innovation support should be targeted to those services which would not be developed by the market otherwise. Such measures should in particular encourage demand-side innovation, the use of available funding sources including regional funds, demand aggregation and development of new businesses.

Finally, a number of challenges in space technologies have parallels to terrestrial challenges. Cross-fertilisation should be fostered, by promoting development of innovative products and services based on satellite infrastructures. As stated in the annex of the proposal for a Council decision establishing the Specific Programme Implementing Horizon 2020[31], "these commonalities offer opportunities for early co-development, in particular by SMEs, of technologies across space and non-space communities, potentially resulting in breakthrough innovations more rapidly than achieved in spin-offs at a later stage".

4.2.2.     Enable advances in space technologies

The objective is to ensure the capability to access space and to operate space systems to the benefit of European society in the next decades. The EU notably intends to boost technological progress in a number of strategic areas and to contribute to the necessary effort in space research in particular in breakthrough technologies. With Horizon 2020 the EU would for instance support the exploitation of synergies in space research at European level, promoting further coordination of R&D activities, thus complementing ESA and national programmes already addressing these issues. Key Enabling Technologies have been recognized as key to all technological industrial competitiveness in Horizon 2020, but also in particular to innovative space technologies. The space industrial policy should therefore support their uptake in new space technologies.

Horizon 2020 could for instance promote R&D support to industry and space research organisations, support the development of application-oriented R&D programmes at universities related to space technologies and promote the transition from prototyping to product/market. Since users require mature technologies (already tested and validated), R&D support schemes should allow supporting validation and qualification. Hosted payloads[32] could contribute demonstrating the required flight heritage for an increasing number of products and services. In order to mitigate the risk created by new technologies for the rest of the payload, the possibility of cost-effective launch opportunities to embark and test new technologies should be assessed.

Furthermore, Horizon 2020 could be used to find alternatives for the components listed within the REACH framework[33], and which may need substitutes in the future.

4.2.3.     Stimulate the full exploitation of space data and the development of innovative applications

The objective is to ensure more extensive utilisation of space data from existing and future European missions in the scientific, public and commercial domain. As stated in the annex of the proposal for a Council decision establishing the Specific Programme Implementing Horizon 2020, "a considerably increased exploitation of data could be achieved if a concerted effort were made to coordinate and organise the processing, validation and standardisation of space data from European missions. Innovations in data acquisition and processing, data fusion, and data dissemination, utilising also innovative ICT enabled forms of collaboration, can ensure a higher return on investment of space infrastructure".

4.3.        Expanding the array and the use of available financial instruments

Space infrastructures funding differs from space components/services financing. Large scale infrastructures which have to be built, developed, operated and maintained in order to ensure the continuity of operational services and applications, need large financial contributions over long periods, continuity of funding both for operational and financial reasons (any expense postponement results in additional costs) and flexibility/contingency instruments, given the associated risks. Existing financial products on the market might not match these needs, especially because of the important time lead between the decision to develop such projects and the return on investment by the deployment of sufficient downstream services. There basically is a market failure and public funding is needed before the long-term growth potential of such projects will emerge. Other space-faring nations have addressed this issue in their own ways[34]. In its proposal concerning the next Multiannual Financial Framework, the Commission proposes a new type of instrument, i.e. the EU project bond initiative which would be used as a means of securing investment resources for infrastructure projects of key strategic European interest by making use of Public Private Partnership schemes to reinforce EU competitiveness and growth sustainability. Although the scope of this initiative is not foreseen to cover space in the first stage, space industry could be offered at a second stage the possibility to benefit from this mechanism, provided it fulfils the criteria, in particular regarding revenue generation[35].

SMEs' participation should be encouraged where appropriate in the supply chain of the manufacturing industry, in particular in niches, and in the fast-growing sector of satellite enabled services. The financial instruments of the Competitiveness and Innovation Framework Programme and also the Risk Sharing Financial Facility for SMEs (RSI) are available to enhance industrial and SMEs innovation capacities and competitiveness. As of 2014, SMEs may also benefit from the EU financial instruments (debt and equity finance) foreseen under the forthcoming programmes COSME and HORIZON 2020, which include venture capital.

Local authorities are key players to enhance the competitiveness of the space industry. Regions have a major role to play. The EU has developed a range of instruments strengthening economic, social and territorial cohesion, in particular the European Regional Development Fund (ERDF) and its schemes like the Joint European Resources for micro to medium Enterprises (JEREMIE). If the primary objective of EU cohesion policy is to reduce the significant economic, social and territorial disparities that still exist between Europe's regions, cohesion policy also has a key role to play in delivering the Europe 2020 objectives throughout the EU and could therefore, through its support to SME competitiveness and innovation, contribute to space projects financing and to promoting the use of space based services in accordance with eligibility rules of the Structural Fund (for instance, proven social and economic impact on the region or regional innovation impact). Space projects could be relevant to foster research and innovation in the framework of the national or regional strategies for smart specialisation.

4.4.        Making a better use of procurement policy

Several Space Council Resolutions highlighted the need to develop adequate EU instruments and funding schemes taking into account the specificities of the space sector". In the space sector procurement is one means among others to achieve industrial policy objectives. It is perhaps the most important because it is through procurement that the vast majority of public funding is channelled to industry in this sector. It is therefore necessary to determine whether the space procurement approach can be improved.

Like the defence and security sectors, space is strategic and procurement of space systems and applications for public needs shares characteristic with those sectors, in particular non-dependence aspects, national security and safety aspects as well as high and long term investment needs in R&D phases. The impact of the implementation of the EU Directives on public procurement and defence procurement[36] on the national and European space markets should also be further analysed.

EU procurement is governed by the Financial Regulation and its Implementing Rules which are in line with the WTO Agreement on Government Procurement. These instruments embody the principle of non-discrimination and do not allow any form of geo return. As a customer of the space industry which is to deliver its programmes, the EU should develop and provide to industry a long term and clear planning of the institutional market. Besides, for programmes which involve joint funding by both the Commission and ESA, early coordination should take place to ensure a smooth transition between the development phase and the operational phase.

4.5.        Establish and implement a real European launcher policy

EU autonomy in strategic sectors like launch services is of fundamental importance. In view of this, the EU space industrial policy should pursue the following objectives: (i) Ensure a reliable, secure, available and cost efficient launcher system; (ii) Create the conditions, and in particular the financial conditions, which are necessary to maintain and strengthen independent European access to space in line with institutional needs while proposing an evolved governance of the exploitation of the European launchers to ensure financial efficiency in the management of user programmes.

A real European launcher policy must be established by the institutional actors, as is the case in the other space-faring nations, to avoid short term or case by case decision taking which would endanger the above goals. The EU should recognize the political stakes of independent access to space when implementing public programmes such as Galileo and Copernicus. Member States should consider accepting a share of the burden by putting their launcher purchasing policies in line with the goal of independent access and by putting the EU in a position to be able to contribute to that goal. In addition, the overall governance of the launcher sector, in particular as concerns its exploitation and the necessary measures to ensure the efficiency of its production, must evolve, in order to ensure sustainable financing of the exploitation.

4.6.        Ensure the sustainability of space activities in Europe

With increasing dependence on space-based systems and services, ensuring their sustainable operations will become increasingly important. Any shutdown of even a part of space infrastructures which form the backbone of a wide range of services could have significant consequences for European citizens' safety and for the well-functioning of economic activities. However, space infrastructures are increasingly threatened by collision risks due to the growing population of satellites or the increasing amount of space debris in the most commercially exploited orbits.

In order to mitigate the risk of collision it is necessary to identify and monitor satellites and space debris, catalogue their positions, and track their movements (trajectory) when a potential risk of collision has been identified so that satellite operators can be alerted to move their satellites. This activity is known as space surveillance and tracking (SST). As operational SST services at European level do not exist, European satellite operators rely today to a large extent on US SST information. The need for a proper SST capability to improve the provision of SST information at European level was highlighted by EU Member States in several Council conclusions. In accordance with these conclusions, the Commission intends to come forward with a proposal setting out the organisational framework for the setting up and operation of a European SST service in partnership with Member States building on their existing assets and expertise.

5. CONCLUSIONS

Space industrial policy supports the objectives of the Europe 2020 strategy, Europe's growth strategy for a smart, sustainable and inclusive economy. It is an integral part of the industrial policy flagship, which calls for a European industrial policy creating the best environment to maintain and develop a strong, competitive and diversified industrial base in Europe, improving employment and knowhow of the sector. However, the Europe 2020 strategy also recognises that space policy contributes to the competitiveness of European industry well beyond the space sector.

ANNEX

Measures envisaged for the space industrial policy

1. Improving framework conditions

1.1.        Improving the legislative framework for the service segment and the manufacturing sector

1.1.1.     Develop space legislative framework to strengthen the European space market

· Propose a legislative instrument on production and dissemination of private satellite data; · Examine the possibility of a legislative instrument on certain aspects that have an impact on the emergence of a single market for space products and services such as: obligation of insurance, registration and authorisation of space activities and services , sanctions, environmental issues.

1.1.2.     Monitor and improve the export control and intra-EU transfer frameworks

· Monitor the impact on the space industry of the implementation of Regulation (EC) No 428/2009 of 5 May 2009 setting up the EU export control regime for dual-use goods and Directive 2009/43/EC of 6 May 2009 regarding EU intra-Community transfer of defence products.

1.1.3.     Ensure the availability of spectrum

· Investigate how to best take into account the future spectrum needs for SatCom in the context of the Radio Spectrum Policy Programme; · Contribute to the preparation of the next ITU World Radio Communications Conference in order to defend EU interests in the field of global and regional spectrum allocations.

1.1.4.     Explore whether commercial spaceflights activities need to be embedded in a legal framework

· Launch a study to assess the market potential of suborbital spaceflights to determine whether to develop a European regulatory approach.

1.2.        Pursue the Standardisation process

· Pursue the development of European Standards for the space industry on the basis of the work started by the ECSS (European Cooperation for Space Standardisation) and the third mandate to CEN-CENELEC and ETSI.

1.3.        Ensure the availability of necessary skills

· Develop and provide to industry a long term and clear vision of the institutional market at EU level; · Carry out and update a mapping of the supply chain to ensure the right level of European independence, expertise and competitiveness; · Support the development of appropriate skills required specifically by the space sector and promote the establishment of mutually recognised academic space qualifications in Europe (initiate and coordinate between Member States the development of space academies); · Include in future R&D framework programmes dedicated actions in which part of the research must be done by PhD candidates – as is currently the case in air traffic management; · Encourage the development of life long learning programmes through strengthened cooperation between industry and universities, in particular in the emerging area of satellite based applications; · Enhance EU appeal to foreign researchers.

1.4.        Support access of European industry to the global market

· Analyse measures and good practices developed by Member States to support access to international markets; · Ensure that the specificities of the space sector and the European space industry are taken into account in trade negotiations and relevant commercial agreements, to foster a level playing field.

2. Supporting Research and Innovation

2.1.        Enable European competitiveness in space, notably by ensuring non-dependence in critical technologies and by fostering innovation

· Continue to coordinate the Commission's efforts with those of Member States, ESA and EDA in order to identify the critical space components and to ensure their availability; · Examine whether it is feasible to boost the emerging Earth observation market through incentives such as long term contracts with Earth observation industry; · Promote the use of space-based applications in EU policies; · Support awareness raising campaigns to make possible users (cities, regions, various industrial sectors, etc) aware of the potential of space-based applications, thus stimulate their needs for such applications and facilitate with ad hoc take up actions (e.g. vouchers for local authorities or SMEs) the adoption of new services by the final users; · Support the development of innovation support measures to industry at EU, national and regional level with a specific focus on SMEs in the downstream satellite-enabled services sector; · Implement the Commission GNSS Action Plan to foster the development and adoption of satellite navigation applications using EGNOS and Galileo; · Support space technology cross-fertilisation with other sectors and spin-in/spin-offs in R&D and Innovation programmes.

2.2.        Enable advances in space technologies

· Increase space research efforts, in particular in breakthrough technologies; · Support the development of alternative technologies to those of competitors; · Promote R&D support to industry and space research organisations, including the downstream service sector and support the development of application-oriented R&D programmes at universities related to space technologies and promote the transition from prototyping to product and market; · Assess hosted payloads business case, to explore the potential for further institutional and scientific use and identify the best ways to address the challenges ahead such as legal issues, government/military requirements, etc; · Assess other cost-effective launch opportunities in order to embark new technologies to test them; · Use Horizon 2020 to accelerate the implementation of substitutes to raw materials needing replacement such as those listed within the framework of the REACH regulation.

2.3.        Stimulate the full exploitation of space data and the development of innovative applications

· Ensure more extensive utilisation of space data from existing and future European missions in the scientific, public and commercial domain.

3. Expanding the array and the use of available financial instruments

· Explore possibilities to facilitate access to finance, especially by SMEs, by promoting the further development of innovative financial instruments and the use of the existing instruments; · Encourage Member States and regions to increase the use of structural funds and innovative financial instruments to promote the development of innovative satellite-based services by SMEs; · Ensure the rapid extension of the scope of the EU project bond initiative to space infrastructures.

4. Making a better use of procurement policy

· Develop and provide to industry a long term and clear planning of the institutional market; · Analyse the impact of the implementation of the EU Directives on public procurement and defence procurement on the national and European space markets; · For programmes which involve joint funding by both the Commission and ESA, early coordination should take place to ensure a smooth transition between the development phase and the operational phase.

5. Establish and implement a real European launcher policy

· Establish in coordination with the other institutional actors a real European launcher policy, as is the case in the other space-faring nations.

6. Support the setting up and operation of a European SST service

· Provide an organisational framework (governance) to support the setting up and operation of a space surveillance and tracking (SST) service at European level building on existing national assets and expertise; define a related data policy taking into account national security interests.

[1]               "EUROPE 2020 A strategy for smart, sustainable and inclusive growth" COM (2010) 2020

[2]               COM(2010)614

[3]               COM(2011)152

[4]               Council Resolution: “Orientations concerning added value and benefits of space for the security of European citizens”, 18232/11, Brussels, 6 December 2011 which concluded "that industrial policy for space should take into account the specificities of the space sector and the interest of all Member States to invest in space assets, and aim at the following common objectives: support the European capability to conceive, develop, launch, operate and exploit space systems; strengthen the competitiveness of European industry for both its domestic and export markets; and promote competition and a balanced development and involvement of capacities within Europe". It also underlined "the need to examine whether appropriate measures may be necessary at European and international level to guarantee the sustainability and economic development of space activities, including those of the European commercial sector".

[5]               COM(2012) 582 final, Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, Brussels, 10.10.2012.

[6]               The Space Economy at a Glance 2007, OECD

[7]               NASA financial report 2009, Euroconsult 2009, and estimates of space technology budgets by ESA for 2009.

[8]               It should, however, be noted that a considerable share of public resources for space research comes not from NASA but directly from other public agencies.

[9]               High tech competitive products can be released on the market at marginal costs, since development costs have already been taken in charge by institutional programmes. The "market price" is arbitrary and linked to a nation's strategic and political goals.

[10]             Given the very small launch rate for all launch service providers (fewer than 10 yearly launches for the European operator), every launch is of crucial importance and a reduction of more than one launch in a given year endangers the very existence of the sub sector and, in the long run, of Europe's space industry, with potential dramatic consequences on Europe’s strategic independence.

[11]             For instance, in the high-sea, satellite communication services are the only available option. Furthermore, affordable satellite communication can support the EU's "blue growth" strategy to support growth in the maritime sector.

[12]             Spectrum is used by an increasing number of wireless applications in several sectors from short range devices to electronic communications services like satellite communications and terrestrial telecommunications services.

[13]             Len Jacobson, GNSS Markets and Applications (GNSS Technology and Applications), Artech House Inc, 2007

[14]             Report from the Commission to the European Parliament and the Council, Mid-term review of the European satellite radio navigation programmes, COM(2011) 5 final, Brussels, 18.1.2011

[15]             Study carried out by PriceWaterhouseCoopers entitled "Socioeconomic benefits analysis of GMES, available at http://esamultimedia.esa.int/docs/GMES/261006_GMES_D10_final.pdf, p. 180.

[16]             Report from the Commission to the European Parliament and the Council, Mid-term review of the European satellite radio navigation programmes, COM(2011) 5 final, Brussels, 18.1.2011.

[17]             "Independence” implies that all needed space technologies are developed in Europe, whereas “Non-dependence” refers to the possibility for Europe to have free, unrestricted access to any required space technology.

[18]             This is for example the case with the atomic clocks on board the Galileo satellites, which is the core payload for such satellites and is produced in Europe by one single non-EU supplier, who is selling to China and India as well.

[19]             Some components or materials used for space (on board satellites or launchers) are listed in REACH and need substitutes if possible.

[20]             For instance 2007, 2008 and 2010 Space Councils, May 2011 Competitiveness Council.

[21]             A minimum volume of institutional launches, as well as development programmes are needed without which reliability is no longer a given and the skills base could not be retained.

[22]             Whose real level has to be assessed over the entire value chain, from public funding in the development phase, public support in the production phase or for the launch base to preference for domestic launches and access to market.

[23]             The initiatives proposed will be set up and implemented in full conformity with the Community rules on State aid, in particular with regard to situations where Member States funds would be involved.

[24]             EU GNSS will have a global coverage. Claims could be lodged in any country in the world before the local courts under the applicable local legislation. The EU is preparing a regulation on EU GNSS third party liability. A similar discussion was held under the aegis of UNIDROIT ("International Institute for the Unification of Private Law") with respect to all services offered by the GNSS. Discussions in this forum have been put on hold in order to potentially integrate initiatives to be adopted at regional level.

[25]             Regulation (EC) No 428/2009 of 5 May 2009 setting up the EU export control regime for dual-use goods and Directive 2009/43/EC of 6 May 2009 regarding the transfer of defence-related products within the Community.

[26]             Previous requirements imposed a significant administrative burden on companies (estimated at 225 hours/licence in the impact assessment of the Directive 2009/43/EC on EU intra-Community transfer of defence products). They also implied long lead times – up to several months – in order to obtain transfer or export licenses.

[27]             The dual-use export control system of the European Union: ensuring security and competitiveness in a changing world COM(2011) 393 final.

[28]             To obtain a license, the operators of suborbital aeroplane just have to inform paying passengers about the risks of the launch and re-entry phases and the safety record of the vehicle type. The passenger then signs a waiver accepting the risk taken.

[29]             European Commission Proposal for a Regulation of the European Parliament and of the Council on the access of third-country goods and services to the Union's internal market in public procurement and procedures supporting negotiations on access of Union goods and services to the public procurement market of third countries, COM(2012)124 final

[30]             For example market replication, pre-commercial procurement, clusters, living labs and other user-driven innovation mechanisms.

[31]             COM(2011) 811

[32]             It refers to the utilization of available capacity on commercial satellites to accommodate additional transponders, instruments, or other space bound items.

[33]             In general, REACH addresses individual substances in the different lists associated to its processes. Some of these, like the "Candidate list" or Annex XIV (list of substances subject to authorisation) trigger direct information requirements on articles ("components") or require authorisation of the use of the substance in Europe.

[34]             It refers notably to the two 10-year contracts recently awarded by the US government to two commercial satellite imaging companies.

[35]             Cf. COM(2011) 659, COM(2011) 660 and COM(2011) 662 concerning the Europe 2020 Project Bond Initiative.

[36]             Directives 2004/18/EC and 2009/81/EC