Complex energy conversion and energy dissipation occur in pump-turbines during the load rejection process. However, the underlying fluid mechanism is not clear. In order to solve these problems, in this study, a three-dimensional (3D) transient turbulent flow in a pump-turbine, with clearance during the load rejection process, was simulated using the method of coupling of the rigid rotor motion with flow and dynamic mesh technology. The simulated rotational speed shows good agreement with the experimental data. Most of the differences of rotational speed between simulations and experiments are very small and lower than 5%. Based on the numerical simulation, the energy conversion process, loss distribution, and flow mechanism in a pump-turbine were analyzed using the method of coupling of the entropy production analysis with the flow analysis. The results indicate that the load rejection process of a pump-turbine is an energy-dissipation process where the energy is converted among various energy forms. After load rejection, the hydraulic loss in the reverse pump process distributes primarily in the stay/guide vanes (GV), the vaneless space, and near draft tube inlet. While the hydraulic losses in the runaway process and the braking process are distributed mainly in the elbow section of the draft tube, the clearance of runner (RN), and the vaneless space, the hydraulic losses are mainly caused by viscous dissipation effects of the vortex flows, including the flow separation vortices, the shedding vortices of flow wake, the secondary flow, and the backflow.