The reason each level of the energy pyramid is smaller than the level directly below it is that:
Because 10% of the energy at each level moves to the next level and some additional energy is converted to heat.
This means that at each step of the energy pyramid, only about 10% of the energy is passed on to the next trophic level. The remaining 90% is lost as heat, used up by organisms in carrying out their daily activities, or lost through waste. This is known as the 10% rule in the transfer of energy in ecosystems.