Japan has awarded Tokyo-based small satellite engine developer Pale Blue a grant of up to $27 million to upgrade its water propulsion technology for larger spacecraft. The four-year-old startup tested its Resistojet engine in orbit for the first time in March, successfully using steam jets to propel a 6U cubesat called Star Sphere.

Pale Blue recently laid the foundation of the 2,000 square meter facility and started producing Resistojet engines suitable for satellites weighing less than 10 kilograms. As part of a multi-stage grant announced by the Japanese government on February 6, Pale Blue aims to develop a water-plasma engine for spacecraft weighing up to 500 kilograms.

The company plans to demonstrate ion thrusters and Hall effect thrusters that use electric and magnetic fields to accelerate fuel and increase efficiency, SpaceNews reported. Pale Blue co-founder and CEO Jun Asakawa. Bradford Space and Aerospace Corp has developed steam engines, but Asakawa said Pale Blue hopes to be the first company to demonstrate ion and Hall effect engines that use water.

According to Asakawa, water is a more accessible and safer fuel to use than xenon gas, which is widely used in ion and Hall effect engines, although it is not yet adapted to propulsion properties.

He said it was too early to tell whether water-based ion thrusters and the Hall effect would be tested on the same satellite in a demonstration planned for around 2027 or 2028.

The first phase of the grant, part of Japan’s Innovation Research 3 (SBIR-3) program, will end in September 2025 with prototypes for each engine. In October, Pale Blue announced $7.5 million in funding to begin mass production of Resistojet engines for customers including Yonsei University in South Korea.