Large data centers provide information processing, storage, and interconnection needed to satisfy the ever-increasing demand for cloud computing and artificial intelligence. These facilities use massive amounts of electric power, water, and real estate measured in gigawatts, millions of gallons, and millions of square feet, respectively.

Not long ago, data center ventures sought and received generous financial inducements to locate in mostly rural locales in great need of investment. Data centers seemed an attractive alternative to prisons, hazardous material dump sites, and temporary housing for illegal aliens.

The Court of Public Opinion on data centers has quickly pivoted from disinterest, or support, to “not in my backyard,” and even “not on my planet you bastards.” Concerns about data centers include environmental harm, real or perceived upward pressure on retail electricity, water, and residential housing prices, and likely market domination of AI markets by a few “Big Tech” incumbents. Other irritants include noise pollution and uncertainty about whether data centers support the local economy after the initial construction phase.

Shifting data centers from earth to space has become an alternative touted as solving concerns without generating new ones. In sun synchronous, low Earth orbit, orbiting data centers (“ODCs”) may have comparatively less environmental impact and lower operating costs in two increasingly expensive categories: the gigawatts of electricity continuously required to power components, and coolants, such as water and glycol, needed to siphon away heat generated by constant operation.

Space Commerce Exuberance

The global consulting firm McKinsey & Company estimates the global space economy will reach $1.8 trillion by 2035, up from their $630 billion estimate for 2023. Low Earth Orbiting (“LEO”) satellite constellations have the potential to provide reliable infrastructure for widely available and affordable broadband access, even in remote, rural, and impoverished locales throughout the world. Other developing market opportunities include development of a vibrant space launch and tourism industry, mineral extraction from asteroids, colonization of the Moon and Mars, and an expanded array of services via commercial satellites.

Some of the world’s most innovative and wealthy entrepreneurs believe space will serve as a profitable frontier well worth the risk and expense. On the issue of ODCs, Elon Musk made a bold prediction: “I actually think that the cost of deploying AI in space will drop below the cost of terrestrial AI much sooner than most people expect. ... I think it may be only two or three years.”

Replacing terrestrial data centers (“TDCs”) largely depends on declining launch costs and the ability to tap “free” solar energy coupled with efficient radiational cooling of the heat generated from continuous operations. To achieve a comparative advantage over TDCs, ODC satellite constellations must collectively deliver services at or below the per-unit cost achieved terrestrially.

Are ODCs a Viable Extraterrestrial Solution?

ODCs conceptually offer a more environmentally friendly competitive alternative to TDCs. On the other hand, ODCs will complicate several key space management and governance issues. ODC proponents may have underestimated or refrained from acknowledging significant risks, increased by the massive increase in the number and close proximity of operational LEO satellites. Potential launches of LEO satellites numbering the millions raise the odds for collisions, especially orbiting in the narrow sun synchronous orbital plane.

Space debris proliferation, without any significant mitigation efforts so far, contributes to congestion, higher collision risks, and the cascading effect of even more debris. At some point, the potential for calamity reaches a tipping point where investors lose enthusiasm and confidence, particularly when one or more collisions actually occur. Additionally, the combination of many more spacecraft launches, and deorbiting of decommissioned spacecraft, will generate toxicity and pollution having uncertain impact on space and Earth’s atmosphere. Consequently, pro-market, regulatory forbearance and statutory interpretations may not continue, particularly if the space commerce environment becomes more risky and costly.

The Gravitational Pull from Unresolved Legal, Regulatory, and Space Governance Issues

The lack of immediate calamities, such as a multi-million dollar collision of two operational satellites, has supported bullish forecasts for space commerce. Yet even with an extraordinary expansion in the size of LEO smallsat constellations, the need to match terrestrial efficiency in information processing and other outputs, or come close, runs up against major technical challenges such as size and weight limitations in launching spacecraft, power production capability of smallsats, and processing power from miniaturized plants.

It remains uncertain how many small LEO satellites will be needed to match the output available from a current Walmart-sized terrestrial footprint and new hyperscale centers forecasted to have an even larger footprint, with power requirements in the 1-5 Gigawatts range, equivalent to 1-5 nuclear power plants and far more solar, wind, gas, oil, and hydroelectric facilities.

Assuming space as a regulation-free, or less regulated venue is highly unlikely. While nation states may appear to lack jurisdiction over spacecraft that quickly moves into and out of airspace, there are terrestrial anchors. No one questions the legality of national regulatory authorities requiring applications to launch satellites, use radio spectrum, and operate both domestically and internationally. Additional regulatory authorities can extend to the nation where spacecraft launches occur, gateway and backhaul earth stations operate, and intact space debris causes damage.

Vastly more LEO spacecraft and “paper satellites,” not yet launched, if ever, will test whether nations can effectively coordinate spectrum and orbital plane usage. As ODC constellations will operate within the narrow parameters of sun synchronicity, they will have to convince regulators, legislators, and investors that potentially millions of satellites, in relatively close proximity, can avoid signal interference, collisions, and orbital coordination conflicts.

ODC commercial prospects may trend down in the degree of exuberance to cautious optimism based on a more realistic assessment of risks and rewards. A sizeable list of challenges includes increased government oversight, coordination and other timetable delays, spacecraft collision potential, whether AI will become profitable, and recognition that operating in space does not eliminate all environmental and other fears, uncertainties, and doubts.