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Summary In this paper, a novel hybrid photovoltaics/thermoelectric cooler (PV/TEC) distillation system has been introduced. The limitation for distillation system working under hot arid climate is the heat removal required for the condensation process. The novelty of the proposed system is that it utilizes TEC to improve the condensation process. The proposed system composed of two porous layers separated by an air gap. The upper porous layer is installed at the back of a PV module; the lower porous layer is installed at the top of a TEC modules layer. This system can provide the demand of electricity and potable water for those people who live in rural areas (using one unit or more). The proposed system prevents PV module from overheating and actively enhancing the condensation process of the evaporated water. A steady‐state mathematical model has been proposed. This model was solved and simulated by equation solver software. Wind speed, solar radiation, and ambient temperature effect on the system performance were simulated and discussed. Results showed that the maximum productivity of the system reached an ambient temperature of 298 K, solar radiation of 1000 W/m2 and wind speed of 5.5 m/s. The maximum yield of the system was 4.2 kg of distilled water per day with a net electrical output power of 73 W with an overall efficiency of 57.9% and PV cell efficiency of 12.32%.