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Volume 2: Reaching Higher: Canada's Interests and Future in Space – November 2012

Part 3
Analysis and recommendations (continued)

Chapter 3.3
Fostering technological and commercial capacity

Although public procurements make important contributions to innovation and the competitive position of the Canadian space sector, they are not the only tool available to government to help the sector thrive. In fact, as technological progress and global trends make space a more and more commercially viable domain, the role of public policies and programs should turn increasingly toward creating an environment that helps Canadian space companies succeed not just in the context of government procurements, but also in the global marketplace.

Such success will depend on the ongoing refinement of existing technologies and development of new ones that anticipate and respond to the needs of public and private sector customers in Canada and around the world. It will also require conditions that facilitate creativity and experimentation by entrepreneurs and researchers.

Recommendation 7: Support for technology development

Government plays a critical part in fostering innovation through funding for R&D. That is one reason why Budget 2012 tightened eligibility rules for the Scientific Research and Experimental Development tax incentive program (SR&ED) in favour of more direct support for promising ideas and projects. Such support is particularly important in a sector like space, where competitive advantage and technological advantage are so closely intertwined.

The main federal programs targeted to applied R&D in the Canadian space sector are the CSA's Space Technologies Development Program (STDP) and Earth Observation Application Development Program (EOADP). Over the years, the proportion of CSA funding devoted to STDP has dropped as budgets have become tight and resources have been reallocated to other activities: it provided $10-20 million annually in funding between 2003 and 2010, but had declined to $4 million by 2011-12. EOADP has remained relatively stable during the same period at about $5 million annually.

Given the significance of innovation to the long-term vitality of the sector, and the scale of other countries' investments in space-related R&D, the level of support for such activities must be raised and protected.

Half of the recommended funding increase should come from a reallocation of savings achieved as a result of the tightening of SR&ED criteria, and half should be reallocated from CSA business lines that will be less active as a result of recommendations in this report, including direct oversight of the space asset design and manufacturing process.

It is important that when public funds are spent with the aim of spurring ground-breaking technologies, support be focused in areas with the greatest potential to benefit the competitiveness of the industry and growth of the economy. To achieve this, the criteria for space-related R&D funding should give preference to proposals that:

• align with the Canadian Space Program priorities approved by Cabinet;
• are submitted by industry-academia consortia with agreements for sharing intellectual property;
• include technology demonstration as well as basic R&D;
• include a sound business plan showing how the proposed technology development activities will result in commercially viable and exportable products and services; and
• have a clearly articulated project management plan, ideally with some sharing of expense and risk by proponents.

Proposal assessments should be jointly conducted by the CSA and the NRC, which has expertise in space research, and in supporting small and medium-sized businesses with the development of technologies that have high potential for commercialization and sale in global markets. More formal management linkages in the NRC's and CSA's technology development programming should also be explored.

Recommendation 8: Encouragement of commercial space activity

The global space business is gradually opening to commercial activity beyond satellite communications. NASA's efforts to sponsor and, eventually, rely upon commercial launch services to low Earth orbit is one driver of this trend, but so are the growing popularity of applications based on data delivered by satellites; the development of new, cheaper technologies for getting to and operating in space; and the interest of serious researchers and investors in space tourism, space mining, satellite refuelling and maintenance services, space debris management, and the collection of solar energy in space for use on Earth.

Some of these ideas may prove fanciful, but others may be visionary and produce tremendous profits for their proponents and for the countries in which those proponents operate. The R&D support recommended previously will help stimulate development of the most promising proposals, but it is impossible to know with certainty whether a notion that appears unrealistic today might lead to tomorrow's breakthrough. Without endorsing specific speculative projects, public policies and programs can create the conditions for entrepreneurs and researchers to test and pursue creative approaches and, in so doing, jump-start Canada's private sector space activity at a time when the global commercial space business is gaining momentum.

A variety of measures will help to create such conditions, and those measures will need to evolve together with space technologies and business dynamics. Measures worth immediate consideration include:

• Intensifying efforts to secure geostationary orbital slots for Canadian-owned satellites. Because space is treated as a global commons, only the government can negotiate access to these slots and make them available to private firms.
• Simplifying regulatory regimes that cover high-altitude testing, suborbital and orbital launches, and human spaceflight. These regimes need to address the inherent risks associated with such activities, but some recalibration may be appropriate in light of technological advances and the desire to encourage safe experimentation.
• Making public infrastructure—from CSA and NRC laboratories in major cities to little-used runways in isolated locations—available at modest cost to companies for the purposes of safely testing new space-related technologies.
• Adopting an open data policy for non-security-sensitive raw data generated by publicly owned satellites, particularly those involved in Earth observation. This policy would be consistent with global trends and Canada's Action Plan on Open Government, and would allow creative individuals and companies to add value and generate economic activity by developing and selling a range of applications.
• Extending the favourable tax treatment currently afforded to investors in flow-through shares of mineral exploration companies to investors in commercial activity in space, whether or not that activity is mining-related. While this measure is unlikely to result in significant uptake in the short term, it has the potential to encourage private sector efforts over the long term.
• Negotiating bilateral sectoral agreements that increase the access of the Canadian space industry to global markets, including procurements by governments abroad, consistent with recommendation 8 in the companion volume on aerospace. Such agreements would help ensure that the application of any exceptions from normal international trade rules is carefully limited to space-related products and technologies that are genuinely security-sensitive.

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