A closed system in thermodynamics is one that does not exchange mass with its surroundings. If the thermoelectric material is the system and the surroundings are the heat source and heat sink, the thermoelectric material is a closed system since it does not exchange mass with its surroundings.
The efficiency $\eta$ of the thermoelectric device equals the energy provided to the electrical load divided by the heat absorbed at the hot junction. Since thermoelectric devices are heat engines, their maximum efficiency $\eta$ is theoretically limited to the Carnot efficiency of
$$\eta=\frac{T_{H}-T_{C}}{T_H}$$
For thermoelectric devices the actual maximum efficiency is a function is a fraction of the Carnot efficiency based on the devices "figure of merit". See devices efficiencies in the following: https://en.wikipedia.org/wiki/Thermoelectric_materials
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