Pierre Chao Looks to the Future of the Propulsion and Energy Market Written 27 July 2016
Speakers: Pierre Chao, founding partner, Renaissance Strategic Advisors
By Duane Hyland, AIAA Communications (2008-2017)
With world turmoil, sluggish markets and changing geopolitical landscapes, it pays to know where the U.S. aerospace community stands and in what directions it may go. Pierre Chao, founding partner of Renaissance Strategic Advisors, discussed the future of the market July 27 in the closing session of the 2016 AIAA Propulsion and Energy Forum in Salt Lake City.
Chao said that although current demand for propulsion and energy systems is sluggish, the industry will see a slight uptick — about 3 percent — in 2017. He said the uptick will not be driven by demand in the U.S. or Europe, but rather from demand in Africa, Latin America, the Middle East and Russia.
However, the current valuation of propulsion company stocks is not going to last, he warned, explaining they have plateaued from their “five-year highs.”
The next great frontier in power systems will be the increasing demand for energy that is efficient and bountiful, Chao said, adding, “1.9 billion people around the world do not have access to electricity.”
Some advocate for clean energy systems while others argue for cheap and reliable energy systems, but Chao explained that if the industry could solve the electricity access and distribution logistics, it could help solve issues like global poverty and labor migration. He said there is no difference between finding reliable energy systems for Mars exploration and finding systems for a village in Mali trying to survive.
For space systems, Chao said he sees a renaissance in heavy launch systems driven by demand in the national security sector, especially as the industry looks for more agile and reliable satellites that are able to survive in the future militaristic space environment.
Focusing on the national security environment, Chao said he thinks predicting the next world threat is about as easy as looking for needles in haystacks.
“It’s more like looking for the tube of straw that will become needles,” he said, adding that nations like Venezuela, North Korea and Iran may be potential trouble spots.
In commercial aviation, there will be an end to the duopoly of Airbus and Boeing in commercial aircraft manufacturing, Chao said.
“It will be China that does it,” he explained.
Among Chao’s other observations were that reliance on the International Traffic in Arms regulations will “continue to isolate the U.S. from world defense markets”; oil shocks could potentially threaten the aviation industry if oil rises back to the prices of $100 a barrel; and the industry hasn’t seen the real advent of venture capital in commercial space.