We propose a new principle of the cascade utilization of both chemical energy and physical energy in energy systems with the integration of chemical processes and thermal cycles. Particularly, a general equation of energy levels of substance, Gibbs free energy of chemical reaction and physical energy is explicitly founded. On the basis of this equation, a chemical-looping combustion and an indirect combustion are investigated. Furthermore, a mechanism of energy release, with the combination of decreasing the energy level of Gibbs free energy and upgrading the energy level of low or middle- temperature thermal energy, is clarified. The promising results obtained here establish a theoretical basis for the further investigation of multi-function systems in which energy and the environment are compatible, and create a new approach to improve the performance of traditional thermal cycles.