I, like most of you, am stuck at home for a very good reason. Between working and toddler-sitting I’ve spent some time musing on the question which I tend to be asked often, why hasn’t the Earth observation (EO) industry taken off (yet)?
The simple answer is the data supply still isn’t there to meet various industry requirements. The longer answer takes a bit more exploring.
The two Earth observation industry camps
Earth observation demand by vertical markets should be considered in two different, but connected camps: new ways of meeting the requirements of existing vertical markets (such as the oil and gas sector, maritime, agriculture etc.), and the potential to open up into new areas (such as finance, location-based-services etc.)
There is a key difference as to the need to keep some separation here: the end-users (and their technical service providers) with longer term usage of EO solutions have a better understanding of its capabilities (or at least some knowledge); the new markets on the other hand have not been exposed to EO, and thus do not really understand (or care) about these capabilities.
These two camps are also likely to be served by different value-added services / information analytics companies. For instance, the established value-added serving markets with broadly similar data needs, such as agriculture, forestry and environment monitoring, are unlikely to suddenly jump to building solutions for the finance sector – it does not have the industry links / software solutions / and years of heritage as it does in other markets – so why make the leap? Rather, new services are more likely to be served by emerging EO services companies.
Therefore, these two types of markets need to be approached differently with regards to how EO solutions are developed and delivered. One commonality is, however, both camps are expected to deliver solutions in a similar way. The focus of EO New Space being to deliver information based on high frequency change detection whatever the application, and to deliver this in a regular fashion to multiple end-users (giving rise to subscription models, Software-as-a-Service etc.) and in doing so open EO to a mass market – shifting from a B2G to B2B business.
New solutions for existing markets
Let’s take agriculture as an illustration. Satellite-based EO has been utilized in agriculture since the start of the Landsat program. Over the last 20+ years it has been used to provide regional/national scale agriculture maps. Sentinel-2 is for instance the workhorse for providing agriculture monitoring across the EU in support of the Common Agriculture Policy.
Here in Canada, you can go to the Agriculture and Agri-food Canada portal and retrieve national scales crop maps. In other words, how to use EO data to derive information on crops and vegetation is not new. Although limited in revenue generation the socio-economic benefits to government using satellite imagery for agriculture is documented (even more so for applications such as environment monitoring and meteorology.)
What could be considered new is the use of satellite-based EO breaking in to the precision agriculture market – potentially a $1 billion+ business. Monitoring wide areas of specific crops would also be able to provide indications to commodity traders – there is a lot of potential, and precision agriculture solutions have been piloted. Note the market for GPS-integrated solutions in the precision agriculture market is already measured in the billions of dollars.
According to service providers and potential end-users of such services, in order to be able to start to tap in to the precision agriculture market the requirements are fairly straightforward: a 2.5 metre – 5 metre ground resolution, a daily revisit (to be able to near guarantee a weekly image during the growing season), at least bands across the visible into near infrared (NIR) with preferably a band in the red-edge, wider swath to limit mosaicking, decent geometric/radiometric accuracy, and to be cost-effective and priced in a way the sector understands (such as dollars per acre per season for a solution).
The problem is the imagery supply being able to meet these demands without compromise. Each current satellite solution can serve the market to some degree – but enough to open up the $1 billion+ market? It will more likely need a dedicated solution focused on agriculture which can fulfill all technical requirements in order to derive the information a farmer requires. A Sentinel-2 type sensor but with a daily revisit and <5m ground resolution, perhaps?
Here is one example; we could easily mention others. For instance, whilst at the European Space Agency in the early 2000s I worked on market development studies focused on oil and gas – the needs of the sector remain the same then as they do today: if you want to monitor a site, you need high frequency, very high resolution at the right price. Over the course of the last 15 years at Euroconsult we interviewed well over 500 companies engaged as a service provider or end-user for EO, and their requirements rarely shift. The story is similar in the world of SAR data. Being able to detect ships combining SAR and AIS data is not a new application, neither are building InSAR solutions to monitor ground motion. The issue is the cost of the right data which inhibits the markets opening up beyond a few customers.
New application areas with a high growth potential – support to the financial sector, providing information on trade, commodity pricing, insurance etc. opens a market which could exceed $2 billion in revenues by the end of the decade according to Euroconsult latest research. However, these communities today are not heavy users of EO solutions, user requirements are less well understood – there is not the same heritage as with the case of agriculture.
The applications over the last five years are being demonstrated – Orbital Insight for instance has shown how retail traffic flow can be used as an early indicator to monitor business chains; or Ursa Space monitoring oil supply sites as an indicator for oil pricing. Further applications can be used to monitor traffic flow out of ports, and so on. Such applications require <1 metre imagery (lower the better) at frequency measured in hours with low latency (… lower the better). It would be expected that information analytics companies would use a multi-source approach to be able to achieve this, however again current supply is an issue. There simply aren’t enough satellites able to offer this level of frequency in-orbit.
The end-user base here not accustomed to EO imagery only cares for the information. But, this also means that if the information cannot be delivered when it’s needed then it will not take-off as an application. The end-user here does not understand, and will be turned off by, “you can’t have your information today because the satellite didn’t pass.” Building these markets is therefore a challenge without the desired satellite infrastructure being in place.
New supply to change the balance?
Several companies are developing solutions targeting specific markets, such as Urthecast, Wyvern in agriculture; GHGSat for site methane emissions; and low-cost SAR through Capella and Iceye; companies such as Blacksky, Satellogic and Planet (Skysats) will all add to the availability of high resolutions data at high frequency. Companies like these could be the key to the solution. Rather than target numerous markets for data sales, instead build a satellite system which is ideally suited to one or two vertical markets.
So why hasn’t any of this been done before? Simply put, the cost to build and launch satellites meant the EO companies had to sell to multiple markets to build revenues. More expensive satellite systems have to rely on the deeper pockets of defence customers, but this can price them out of building solutions for civil and commercial business. Lower cost vertical market focused satellite systems will aim to change this paradigm and eventually unlock the satellite-based Earth observation business.
However, there is a risk. Most companies still require funding. The investor appetite for space is also a little so-so; exits are needed (in EO and in other space applications). A problem for EO is that a valuable exit is unlikely unless the company is fully operational (or close to) and has solutions to serve market requirements. It is somewhat of a chicken and egg scenario. Much will depend on what happens over the next two years; if constellations are launched and can deliver then the potential for satellite based EO is massive. If there are delays, or systems perform below expectations, then the promises of the industry may have to wait a little longer.