The rapid expansion of the remotely piloted aircraft market includes a particular interest in 10 kg to 25 kg vehicles for monitoring, surveillance, and reconnaissance. Power plant options for those aircraft are often 1 kW to 10 kW (10 cm3 to 100 cm3) internal combustion engines. Both power and fuel conversion efficiency decrease increasingly rapidly in the aforementioned size range. Fuel conversion efficiency falls from near 30% for conventional scale engines (>100cm3) to less than 5% for micro glow fuel engines (<10 cm3), while brake mean effective pressure drops from more than 10 bar (>100cm3) to less than 4 bar (<10cm3). Based on the literature, it is unclear what loss mechanisms are responsible for the increasing rate of decreasing performance. Energy balances consisting of five pathways were experimentally determined on two engines representative of Group 2 remotely piloted aircraft propulsion systems and compared to energy balances in the literature for larger and smaller engines. The five pathways were brake power, cooling load, sensible exhaust enthalpy, incomplete combustion, and short-circuiting. The results show that incomplete combustion and (in the case of two-stroke cycle engines) short-circuiting is responsible for the decrease in fuel conversion efficiency as engine displacement decreases from greater than 100 cm3 to the 10 cm3 to 100 cm3 size range. The results show that the percentage of heat transfer losses in 10 cm3 to 100 cm3 engines was not appreciably higher than conventional engines, and that these engines have thermal efficiencies (fraction of shaft work to released energy) around 35%, which is comparable to conventional scale spark ignition and compression ignition engines. As engine displacement decreases below 10 cm3, heat transfer losses increase due to the rapid increase in surface area to volume ratio, compounding with already large short-circuiting and incomplete combustion losses, which results in rapid decreases in both power and fuel conversion efficiency. In addition to these scaling results, the high short-circuiting noted in both engines tested (40% to 50% at some wide open throttle conditions) underscores the benefits of employing short-circuiting management techniques such as throttle body injection and direct injection, exhaust and intake tuning, and port optimization. The cost benefit tradeoff of these techniques in the context of commercial off the shelf (COTS) based design is also discussed. Implementing these technologies would improve engine performance, but the cost (especially for direct injection and port optimization) could quickly negate the benefits of selecting COTS systems for low production run aircraft.