Ocean Thermal Energy Conversion (OTEC) uses the ocean thermal gradient between cooler deep and warmer shallow or surface seawaters to run a heat engine and produce useful work, usually in the form of electricity. OTEC can operate with a very high capacity factor and so can operate in base load mode.

The denser cold water masses, formed by ocean surface water interaction with cold atmosphere in quite specific areas of the North Atlantic and the Southern Ocean, sink into the deep sea basins and spread in entire deep ocean by the thermohaline circulation. Upwelling of cold water from the deep ocean is replenished by the downwelling of cold surface sea water.

Among ocean energy sources, OTEC is one of the continuously available renewable energy resources that could contribute to base-load power supply. The resource potential for OTEC is considered to be much larger than for other ocean energy forms. Up to 88,000 TWh/yr of power could be generated from OTEC without affecting the ocean's thermal structure.

Systems may be either closed-cycle or open-cycle. Closed-cycle OTEC uses working fluids that are typically thought of as refrigerants such as ammonia or R-134a. These fluids have low boiling points, and are therefore suitable for powering the system's generator to generate electricity. The most commonly used heat cycle for OTEC to date is the Rankine cycle, using a low-pressure turbine. Open-cycle engines use vapor from the seawater itself as the working fluid.

OTEC can also supply quantities of cold water as a by-product. This can be used for air conditioning and refrigeration and the nutrient-rich deep ocean water can feed biological technologies. Another by-product is fresh water distilled from the sea.

OTEC theory was first developed in the 1880s and the first bench size demonstration model was constructed in 1926. Currently operating pilot-scale OTEC plants are located in Japan, overseen by Saga University, and Makai in Hawaii.