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A fire in the rocket engine seconds after liftoff, and then a nosedive into the ocean, are not exactly what you hope for after investing $100 million and nearly four years in developing what was supposed to be an ultrasafe vehicle for cheap space launches and space tourism.

But despite just such a setback on March 24 on Kwajelein Atoll in the Pacific Ocean, Space Exploration Technologies (SpaceX) is forging ahead with plans to develop a whole new family of semireusable rockets, which it hopes will provide a competitive, low-cost way for U.S. astronauts and cargo to get to the International Space Station once the space shuttle is retired.

[Click here to view the SpaceX rocket.]

SpaceX of El Segundo, CA, is one of at least a half-dozen companies seriously competing to revolutionize space travel in much the way a few savvy entrepreneurs transformed computing in the 1970s and ’80s. The new companies are trying a variety of approaches aimed at reducing launch costs by a factor of ten. Many of the companies started out competing for the $10 million Ansari X Prize, awarded in 2004 for the first privately financed rocket to fly into space twice in two weeks. (That rocket, the suborbital SpaceShipOne, was built by Burt Rutan’s Scaled Composites, of Mojave, CA.)

But of all the companies, only SpaceX–founded by Elon Musk, who made $300 million founding and selling the Internet payment service PayPal–is building vehicles right now that are designed to go all the way into orbit, carrying commercially valuable satellites at a fraction of current prices. While SpaceX’s rocket resembles conventional rockets, every part of it is new and designed from scratch–the first entirely new orbital rocket designed in the United States in more than a decade. And it is the first privately funded liquid-fueled orbital rocket ever developed anywhere. It is being paid for almost entirely from Musk’s personal fortune.

SpaceX uses a new kerosene-oxygen engine based on those used in the U.S. Apollo program. The company is minimizing development costs by using a single-engine design for a family of rockets that can carry a variety of payloads. The smallest of these would use one engine, the middle version five engines, the largest nine engines. This large rocket, the Falcon 9, will exceed the capacity of today’s heaviest-lift U.S. rocket, the Atlas V.

The company plans to sell launches on the Falcon 9, scheduled for its first flight next year, for $27 million, compared to an estimated $120 million for the Atlas V, and many analysts think this could open up whole new markets for the launch business, including space tourism and the deployment of scientific and commercial satellites that might be impractical at today’s prices.

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