Hydraulic confined piston engine (HCPE) integrates traditional internal combustion engine and hydraulic pump into one assembly, which can transform the thermal energy from fuel combustion into hydraulic energy, is a new type of flexible power device. The dynamic model of HCPE was constructed firstly, and then the energy input, dissipation, distribution and output under nominal working condition were simulated. During energy transformation, the loss related to combustion is 57.65%, friction related loss is 6.24%, hydraulic system related loss is 7.78%, effective power output is 26.87%, and the other loss is 1.46%. The curve of effective power ratio shows convexity shape along with increase of rotational speed or throttling.