With the International Space Station (ISS) approaching the end of its service life, NASA faces a critical decision: how to maintain a continuous human presence in low Earth orbit (LEO) while managing significant budget constraints. In an attempt to solve this challenge, NASA is exploring the viability of commercially operated space stations, planning to act as an anchor tenant.

But whether a commercial replacement for the ISS is indeed feasible is another matter entirely.

NASA’s ambition is to transition from the government-owned ISS to a commercially managed space station, continuing crucial microgravity research, biomedical studies, and the testing of technologies for future deep space missions. This plan involves NASA purchasing astronaut time on commercial space stations instead of building and maintaining its own, effectively shifting the financial burden of station development and operation to private companies. However, this approach has significant challenges.

The fundamental issue revolves around financial viability. The cost of building, launching, and maintaining a commercial space station is enormous. To achieve a reasonable return on investment (ROI), companies would need to generate far more revenue than what NASA alone can provide.

The core premise of NASA acting as an anchor tenant is intended to de-risk the investment, but the potential revenue from NASA’s contributions alone is insufficient to cover the operational expenses, let alone make the venture profitable.

As a result, private companies must seek other revenue streams, such as space tourism, commercial research, or manufacturing — all of which present additional challenges.

Space tourism, while often cited as a key revenue source for commercial space ventures, has its limitations. Competing services, such as free-flying Crew Dragon missions that can provide a few days of orbital experience at a fraction of the cost, pose a significant threat to the profitability of private space stations.

The cost per seat for a commercial space station is estimated at around $125 million, whereas missions like SpaceX’s Inspiration4 offer shorter, free-flying experiences at a significantly lower price point. Consequently, attracting enough tourists to make space tourism a viable business model appears improbable given these high costs.

Commercial research and manufacturing are also cited as potential revenue sources, but these have struggled to gain traction due to the absence of a “killer app” — an application or breakthrough that would justify the high costs of LEO operations. The ISS has served as a platform for various experiments and innovations, yet nothing substantial enough to drive consistent commercial demand has emerged.

For a private space station to be sustainable, it would require a steady inflow of commercial contracts, something that is currently lacking.

Another key problem is NASA’s expectation for station providers to operate on an “all-inclusive” model, covering everything from crew and cargo transportation to life support and station maintenance.

This operational setup demands that commercial operators manage a wide array of expensive, complex responsibilities with minimal NASA involvement. This structure is in contrast to the ISS model, where NASA shares responsibilities for maintenance and operations.

The need for dedicated private crew members to perform non-research tasks adds an additional layer of cost, further straining the financial feasibility of the project.

The financial projections paint a bleak picture for commercial space stations. The cost to NASA for research on these stations may only be slightly lower than the current ISS model, while the additional costs for private companies to achieve profitability are significant. The fixed costs, including mission control, engineering support, and transportation, compound the already challenging economics of sustaining a space station without consistent and reliable external revenue.

The reliance on commercial crew transport providers, primarily SpaceX, also introduces a layer of uncertainty. If these providers experience technical setbacks or price increases, the operation of a commercial space station could be seriously impacted. The reliance on just one or two transportation options makes the entire endeavor vulnerable to disruptions, which could jeopardize both profitability and continuity of human presence in LEO.

Given these challenges, three possible outcomes are likely for the future of LEO.

The first scenario is that NASA decides to build and operate a scaled-down version of the ISS — a solution that would maintain a government-operated station while accommodating current crew transport capabilities.

The second scenario is that NASA pivots away from maintaining a permanent LEO presence altogether, instead redirecting its focus and resources towards more ambitious exploration initiatives, such as crewed missions to Mars or lunar base development.

A third potential path forward involves a hybrid approach where NASA maintains more significant ownership while partnering with private companies for specific services. This model could potentially alleviate some of the financial burdens on private companies while ensuring that NASA retains control over critical aspects of the station.

Alternatively, starting with smaller, specialized research platforms instead of attempting to replicate the full capabilities of the ISS could allow for more manageable development and operational costs.

International collaboration could also play a key role in distributing the financial burden of maintaining a LEO presence. By expanding partnerships with other space agencies and commercial entities, NASA could reduce costs while retaining a significant presence in LEO, similar to the current ISS model but with increased commercial involvement.

While the idea of transitioning to commercial space stations is appealing in theory, fostering a “low Earth economy” and opening up LEO to commercial ventures, the current reality is far from straightforward. The financial model appears unworkable without significant adjustments to the cost structure, NASA’s participation, and the availability of a thriving non-NASA market.

The high cost of crew and cargo transport, combined with the operational complexities and insufficient revenue streams, makes it difficult for commercial providers to make a profit.

One could argue that NASA’s approach, while innovative, might be too optimistic in assuming that the private sector can sustain a space station in LEO under current market conditions. The lack of guaranteed customers outside of NASA and the enormous capital investment required means that private companies face a daunting path to profitability.

If the goal is to ensure a continuous U.S. presence in LEO, the risks associated with relying solely on commercial space stations may be too high, especially if this results in a scenario where the U.S. loses its permanent orbital platform after the ISS.

On the other hand, the push for commercialization does have potential long-term benefits, encouraging innovation and cost reductions in the space industry. The involvement of private players has already led to significant cost savings in launch services, as seen with SpaceX’s Falcon 9.

However, the scale of savings needed to make a space station commercially viable is far greater, and without a compelling business case beyond NASA’s support, it is difficult to envision how these savings could be realized in the short to medium term.

The proposed hybrid model, scaled approach, and increased international collaboration could provide a more sustainable path forward. These alternatives offer a realistic way to maintain human presence in LEO without placing unrealistic expectations on private entities. By recognizing the limitations of full privatization, NASA and policymakers could create a framework that balances government involvement with commercial innovation, ensuring both financial viability and continuity of operations.

Replacing the ISS with a commercially operated space station is an idea that represents both the promise and the challenges of modern space exploration. While NASA’s Commercial LEO Development Program aims to shift the financial burden to private entities, the financial models appear untenable without substantial changes to reduce costs or identify additional revenue streams.

The high cost of transportation, the lack of a non-NASA market, and the operational demands make it challenging for private companies to achieve profitability.

The most likely outcome is that NASA will eventually opt to build a smaller, government-operated station to replace the ISS, ensuring continued human presence in LEO without placing unrealistic expectations on commercial providers. Alternatively, NASA could decide to abandon LEO entirely, focusing its efforts on more ambitious goals like Mars or lunar exploration.

A third, more nuanced approach involving hybrid models, smaller specialized platforms, and expanded international collaboration may provide a more balanced solution, allowing both government and private entities to contribute to a sustainable LEO presence.

Either way, significant obstacles remain before a commercially viable space station becomes a reality, and the current plans for a commercial replacement face many of the same financial and logistical issues that have historically challenged human spaceflight in LEO.