Abstract Coalescence of multiple magnetic islands is recognized as an effective process to energize particles during magnetic reconnection, while its energy conversion process still remains unclear. Here, a two-dimensional fully kinetic simulation of multiple island coalescence with a small reconnection guide field is studied. In the analysis of energy conversion within a magnetic island, the dot product of V e · j × B = w 1 is a useful quantity to compare with j · E = w 2 , since the average work done by the Lorentz force on the circulating particles is negligible in the island and w 2 − w 1 = j · E + V e × B = j · E ′ = w 3 . A bipolar pattern of w 1 is found at a secondary island when the electrons are in circular motion inside the island. Significant energy dynamo ( w 3 < 0) resulting from j ∥ E ∥ is found at the secondary island, which has not been reported before, where the parallel electric field E ∥ is highly correlated with w 3 . Moreover, significant energy dissipation ( w 3 > 0) due to j ⊥ · E ⊥ ′ is seen in the merging region between two coalescing islands. Both types of energy conversions are accompanied by enhancements in j ∥ and the parallel electron temperature T e ∥ . Three ion-scale magnetic islands (FR1, FR2, and FR3) observed by the Magnetospheric Multiscale spacecraft are compared favorably with the simulated signatures of energy dynamo and dissipation of an evolving secondary island. In particular, FR1 displayed a similar energy dynamo signature as that simulated in an early stage of the secondary island. FR2 and FR3 showed a dominant j ⊥ · E ⊥ ′ energy conversion similar to that obtained in a later stage of the secondary island.