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A heat engine uses a repeating thermodynamic cycle to turn part of an incoming heat transfer into net outgoing work. In the two-thermal reservoir model, the hot thermal reservoir supplies heat $Q_h>0$ at fixed temperature $T_h$, and the cold thermal reservoir receives heat of magnitude $Q_c>0$ at fixed temperature $T_c<T_h$. A Stirling engine makes the repeated motion visible; the abstract energy budget applies independently of its particular mechanism.^[ref]

Choose the entire cyclic device as a closed system, with no net change in bulk kinetic energy or potential energy. Count heat entering as positive and net work delivered as positive, as in the first law of thermodynamics. Thus $Q_h$ enters with a plus sign and $Q_c$, although a positive magnitude, enters with a minus sign. Assume these two heat transfers and the net work are the only transfers across the boundary. Over one complete thermodynamic cycle, all stored energy, including internal energy $U$, returns to its starting value:The device does not accumulate heat from cycle to cycle. More precisely, heat is a transfer, while internal energy is what can be stored; even a component that temporarily stores internal energy must return to its initial state for this boundary to be cyclic.^[ref]

For engine operation, $Q_h>Q_c$ and $W>0$. Its thermal efficiency isUse net work, after subtracting any work supplied during compression or required by auxiliaries included in the chosen device. For periodic operation, average power satisfies $P_{\mathrm{out}}={\dot{Q}}_h-{\dot{Q}}_c$ and $\eta =P_{\mathrm{out}}/{\dot{Q}}_h$, with the rates averaged over complete thermodynamic cycles.^[ref]

For a stipulated model at $T_h=600\mathrm{K}$ and $T_c=300\mathrm{K}$, let $Q_h=1000\mathrm{J}$ and $Q_c=600\mathrm{J}$ per thermodynamic cycle. Then $W=400\mathrm{J}$ and $\eta =2/5=40\%$. At two thermodynamic cycles per second, these become $2000\mathrm{W}$ incoming heat transfer, $1200\mathrm{W}$ outgoing heat transfer, and $800\mathrm{W}$ net power. These are constructed values, not measurements.

Different signs describe different tasks. With the same directions of heat transfer, $Q_h=Q_c$ gives $W=0$: a device transmitting heat without net work output. If $Q_c>Q_h$, net work is supplied to that device. A refrigerator or heat pump instead extracts heat from the cold side and delivers heat to the hot side, using positive input work $W_{\mathrm{in}}$ and the balance $Q_h=Q_c+W_{\mathrm{in}}$. Their useful output is heat transfer, measured by a coefficient of performance. Finally, a one-time isothermal expansion can have $Q=W$ and $\Delta U=0$ while leaving the volume changed: it is not a complete thermodynamic cycle. A warming device also fails the cyclic assumption, and a fuel-consuming device requires an accounting of matter crossing its boundary.

For two fixed thermal reservoirs at positive thermodynamic temperatures, the Second law of thermodynamics strengthens the energy balance toEquality requires the overall operation to be a reversible thermodynamic process, including its heat transfer to the thermal reservoirs. The Carnot cycle explains how the reversible benchmark is constructed, and Carnot's theorem explains its universality and the entropy production penalty. Use kelvin values, never ratios of degree Celsius readings. The example above lies below the $50\%$ bound: its total entropy production is $-1000/600+600/300=1/3\mathrm{J}{\mathrm{K}}^{-1}$ per thermodynamic cycle.

This is useful before building a machine: warmer cooling surroundings reduce the possible thermal efficiency, even if the mechanism is unchanged. A small observed thermal efficiency does not by itself test the Second law of thermodynamics; heat leaks, friction, incomplete recovery of work, and the measurement boundary can all reduce the reported ratio. A meaningful comparison requires the actual thermal reservoir temperatures, matched heat and net work measurements, and the hypotheses of Carnot's theorem. Finite bodies whose temperatures change are treated separately there.

The practical question already appears in the 1824 Réflexions sur la puissance motrice du feu et sur les machines propres à développer cette puissance by Sadi Carnot: pp. 6–8 ask whether machines driven by heat have a fundamental limit and whether changing the working substance can improve their output. Pages 9–11 describe heating and cooling in real machines, but use the historical caloric theory, rather than the modern first law of thermodynamics balance. The historical discussion under Carnot's theorem explains that distinction.

A heat pump uses work to deliver heat to the region we want to keep warm. Its useful output is the hot-side delivery $Q_h$. The same operating machine can be described as a refrigerator when the cold-side extraction $Q_c$ is the objective: which output is useful changes the coefficient of performance, while the energy balance stays $Q_h=Q_c+W$. Heating a water bath by taking heat from a colder water bath makes this distinction visible in the heat-pump calorimetry experiment below. ^[ref]

In the illustrative budget from refrigerator, supplying $1\mathrm{kJ}$ of work delivers $4\mathrm{kJ}$ of useful heat, giving a heating coefficient of performance of $4$. The additional $3\mathrm{kJ}$ came from the colder region. Compare an ideal electrical heater whose entire input work becomes heat in the target region: it delivers $1\mathrm{kJ}$ for that input. The appeal of a heat pump is this ability to move existing energy, while the Second law of thermodynamics limits the work saving for a given pair of temperatures.

A refrigerator removes heat from the region we want to keep cold and releases heat to warmer surroundings. Here we consider a work-driven cyclic device: its useful output is the cold-side extraction $Q_c$, and its input is net work $W$. A food compartment is a familiar example; the same cooling objective applies when removing heat from a room. The coefficient of performance measures extraction per unit work, rather than the fraction of input energy converted into output. ^[ref]

Choose the complete machine as the thermodynamic system. Let $Q_c>0$ be heat entering from the colder side, $Q_h>0$ be heat delivered to the hotter side, and $W>0$ be net work supplied, all over the same complete cycle. Assume these are its only energy transfers, no matter crosses the outer boundary, and there is no net change in stored energy. Returning to the initial state gives $\Delta U=0$, so the first law of thermodynamics readsThe heat leaving the warmer side includes both the extracted heat and the supplied work. For instance, stipulated transfers $Q_c=3\mathrm{kJ}$ and $W=1\mathrm{kJ}$ require $Q_h=4\mathrm{kJ}$; the cooling coefficient of performance is $3$. This is an illustrative budget, not measured performance. At steady operation the same balance holds for average transfer rates, ${\dot{Q}}_h={\dot{Q}}_c+P_{\mathrm{in}}$, where $P_{\mathrm{in}}$ is input power.

This budget explains a useful counterexample: operating a refrigerator with its door open inside an otherwise isolated room cannot cool the room as a whole. If both heat transfers occur within the room and the electrical input comes from outside, the room gains $Q_h-Q_c=W$ each cycle. Locally cold air does not imply net cooling. The Second law of thermodynamics permits cold-to-hot transfer because work is supplied; it forbids a cyclic device whose sole effect is that transfer. See the Clausius statement of the second law.