Assessment of alternate fuel is categorized on thermophysical aspects and performance—emission derived due to its combustion. Data derived from such analysis is short as the energy expenditure to available chemical exergy of fuel is rarely studied. The study of energy derived from fuel energy gives a detailed picture of fuel efficiency and broadens the field of fuel search criteria. The current article aims to find the thermodynamic effects in terms of energy and exergy utilization of neem biodiesel blends and nickel oxide nano additive dosed neem biodiesel blends. Neem biodiesel was transesterified using standard procedures and analyzed using gas chromatography and mass spectroscopy. Later, neem biodiesel was blended with diesel in three volumetric proportions, that is, NB25, NB50, NB75, and pure Neem Oil Methyl ester was investigated as an engine fuel, and later synthesized nickel oxide nano additives of 25 mg/L was added to all the above fuels and further studied for energy, exergy utilization on a TV‐1 VCR engine test rig under varying engine CR. Nickel oxide additives were manufactured using homogenous addition method and were thoroughly studied for formation and presence of constituents using XRD, FE‐SEM, and EDS methods. The usage of nano additives does prove reduction in exergy destruction and entropy generation for NB25 base blend with 25 mg/L NiO leading to a reduction of 8.2% and 9.7% when compared to base blends. Also, the emission found for hydrocarbon, and carbon monoxide for all base fuel blends reduced by an average of 16.8% and 7.35%.