On the issue of energy transform in local circulation, the governing equations of layer perturbation potential energy order 1 (denoted as L_PPE1) and kinetic energy (K_E) are derived and the spatial distribution and seasonal variation of the related terms are investigated, the energy budgets of South China Sea summer monsoon (SCSSM) activity in different phases are studied. At 850 hPa level, the sources of L_PPE1locate in the Intertropical Convergence Zone, most monsoon regions, and storm track regions, while the sinks of L_PPE1locate in the subtropical eastern oceans and high latitudes. In general, the strong sources (sinks) of L_PPE1coincide with the ridges (troughs) in its zonal departure distribution. The conversion term (C_K), which links L_PPE1and K_E, is determined by the vertical velocity and atmospheric stability. Corresponding to warm air ascending or cold air descending, the conversion term is positive, indicating that L_PPE1transforms to K_E, and vice verse. At 850 hPa, the conversion term is featured by the maxima over the Intertropical Convergence Zone and most monsoon regions, and C_Kis also positive over the storm track region in the Northern Hemisphere and in the westerly belt in the Southern Hemisphere. This is applied to the energy budget of SCSSM activity; the conversion term grows rapidly in the phase of SCSSM revival and subsequently dominates in the active phase of SCSSM. In the active phase of SCSSM, the conversion term is about 2-3 times as much as the energy flux transported through the boundary, indicating that the conversion term plays a crucial role in SCSSM revival and active SCSSM. In addition, the condition of active SCSSM is explored, the results show that when L_PPE1equals its summer climatological normals, SCSSM tends to be active if the ascending velocity exceeds the threshold velocity.