The expanding nozzle consists of two bells, one inside the other. One, attached directly to the engine nozzle, is designed for use at lower altitudes and is short and squat. The other, sitting outside the first, fits over the lower altitude bell to extend it into a longer and narrower (measured in terms of length) bell used for higher altitudes. At liftoff the outer bell is pulled up from the inner bell, out of the way of the exhaust. At some point as the spacecraft climbs, the outer bell is pushed back down over the inner bell to increase the effeciency.
While simple in concept, and easy to predict in terms of performance, the expanding nozzle design has a serious problem, in that it is considerably more complex to build that would seem obvious. This is due to the fact that engine bells must be cooled to avoid damage from the hot rocket exhaust, which they typically do by running either the oxydizer or fuel (in the case of LH2 fueled engines) though tubing in the bell. With one part of the bell moving, this becomes considerably more complex, so complex that the small advantages of the design are often considered too costly.
The Space Shuttle Main Engine was originally designed to use an expanding nozzle. Since these engines are fired from takeoff right into space, any sort of altitude compensation could dramatically improve the overall performance of the engines. This feature was later adbandoned in one of the many cost-cutting phases of the Shuttle design, and today the SSME suffers a 1/4 drop in performance at low altitude as a result.
Glushko has used an expanding nozzle on one design, the RD-701 tripropellant rocket. Funding ran out with the fall of the Soviet state, but the designers are convinced the engine is a "winner" and have approached several parties for additional funding.
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