What is degraded energy?

While transforming energy from one from to another desired form, the entire energy does not change into the desired form. A part of energy changes either to some other undesirable form (usually heat due to friction) or a part is lost to the surroundings due to radiation and becomes useless. This conversion of energy to the undesirable form is called dissipation of energy.

Since, this part of energy is not available to us for any productive purpose so we call this part of energy as degraded energy.