As far as I know, a thermoelectric generator has about 5-8% of efficiency. That means it uses 5% of the heat and converts them to electricity. Rest 95% is dissipated through the other side. So I can increase the efficiency by stacking the modules and converting the dissipated heat to electricity again and again. But when I stack the modules, the voltage of the first module starts to decrease whether it's getting the same amount of heat it was getting when it was alone. So why does the voltage decrease after stacking the modules and where is the wasted energy going?
It most likely decreases because your cooling is now less effective. Remember that the important thing for a thermoelectric generator is not the heat but the temperature diffrence. Having a high-temperature hot source is not more important than having a cold cooling sink.
Were there no change in the cold-side temperature of the top generator when stacked, then the generator won't notice that something else has been attached. And then the output would be the same. But that would mean an in-between temperature equal to the cold-side temperature before stacking. The cold-side temperature must then be even lower for the stack - we are thus talking about a completely different scenario for application here, and I doubt that is what you mean.
Also, note that thermoelectric generators are still limited by the Carnot efficiency. Stacking - often called segmentation - done with proper materials that each is optimized for the temperature range at their specific position in the stack, will indeed show increased overall efficiency and is a hot research topic at the moment. The main issue with this is that at every contacting interface there are contact-losses, in the form of resistance against electronic conduction or lowering of the important Seebeck coefficient. Of this reason the joining mechanisms used are very, very important; maybe the most important.
3$\begingroup$ To expand a little on your last paragraph, it's generally not efficient to take something that isn't efficient and just add more of them in series. Efficiency doesn't add up; so unless you carefully design the system around several parameters; you shouldn't expect it to help the efficiency by just doubling up on equipment twice. $\endgroup$– JMacSep 3, 2017 at 14:14
$\begingroup$ To add onto @JMac comment, it should be mentioned that simply "doubling up" the same thermoelectric generator multiple times when talking about stacking/segmentation is a very poor method also because a thermoelectric material is optimized for a specific temperature range. The last generator in a stack will not experience the same temperature difference as the first one, so the materials used must differ down through the stack. They cannot simply be mass-produced in many equal copies and then stacked. $\endgroup$– SteevenSep 3, 2017 at 14:21
This article about different thermoelectric generators configurations might help, https://www.mdpi.com/1996-1073/13/9/2297
1$\begingroup$ As it’s currently written, your answer is unclear. Please edit to add additional details that will help others understand how this addresses the question asked. You can find more information on how to write good answers in the help center. $\endgroup$– Community BotJan 17 at 12:45