Ocean thermal energy conversion (OTEC) utilizes a temperature gradient in the ocean between surface and depth to generate electricity. The condition for maximized work output from the heat engine in the OTEC system is determined by the balance of the donated heat duty from the heat source and the thermal efficiency of the heat engine. Since the thermal efficiency mainly depends on the available temperature difference of the heat engine, the thermal efficiency itself does not show the performance of the energy conversion system. Therefore, an alternative definition of thermal efficiency for the performance evaluation of systems is inevitably required. Firstly, this research clarifies the potential energy of the heat sources using the dead state as the thermal equilibrium state of the finite heat sources instead of the infinite quantity of the environmental temperature. Secondly, the normalized thermal efficiency of energy conversion, which is defined as the ratio of the work over the potential energy, is proposed. The normalized thermal efficiency coincides with a change in the work from the heat engine. Finally, the exergy and exergy efficiency are proposed based on the dead state as the thermal equilibrium state applying the ideal reversible heat engine. The normalization method of the efficiency is verified that the same manner with the maximum power and entropy generation minimization.