I have read that it increases thrust and reduces noise. Is there a downside to this?
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An answer to your question can be found here.
Advantages of ducted fans would be:
For almost all aircraft designers, their drawbacks have weighed more heavily:
The highest propulsion efficiency is possible with a large, slow-spinning prop. Once flight speeds approach the speed of sound, the propeller has to become smaller to avoid supersonic propeller tips, and then the shrouded design becomes more attractive. Electric airplanes so far are not fast enough to profit from this effect. I would be very skeptical of the increased thrust claim - both efficiency and thrust of the E-Fan ducted fans are lower than what a well-designed propeller can offer.
The addition of the shroud only increases thrust when compared to the naked fan, but the fan is a poor replacement for a decent propeller at low speed.
R W Hovey indicates Ducted Fans are more efficient below 100-110 mph, with 80 % propulsion efficiency (percent of delivered mechanical power that is converted to thrust), above this, a free propeller is better, 85 % efficiency from 200 to 300 mph, up to 400 mph, when it drops to 60 %, and is catched by turbofans, 64 % efficiency at 450 mph; above 500 mph, turbojet leads, but with a low 61 % efficiency, figures for jets start in 40 % at 300 mph.