Electrical energy can be generated by the bubble motion inside the magnetic nanofluid under the influence of an external magnetic field. The relative movement of the magnetic particles dispersed in the magnetic fluid is induced through the movement of the bubbles rising by buoyancy force. This disturbs the external magnetic field associated with the generator coil, and electrical energy can be generated. The bubble movement in this complex physical environment was studied through 2D numerical analysis. Commercial magnetic fluids EFH1 and EFH3, manufactured by Ferrotec, were selected as the working fluid for the investigation. A level set method was used to analyze the 2-phase flow of bubbles motion in the magnetic fluid. The effect of magnetic particle concentration on the behavior of bubbles and the change of bubble flow patterns through interaction between bubbles were observed by analysis. In addition, the influence of the magnetic force caused by the external magnetic field on the behavior of the bubble was also investigated. The following results can be obtained through the analysis of this study. The high concentration of magnetic particles increases the viscosity and attenuates the rising velocity and the lateral oscillation of the bubbles. The interaction of the 2 bubbles depends on the initial relative distance. Merging occurs only between 2 bubbles within a certain initial distance, which maximizes disturbance of the surrounding magnetic fluid. The magnetic force exerted by the permanent magnets externally applied is relatively small in comparison with gravity. Therefore, the effect on the rise behavior of the bubble is not significant. In consideration of the overall external force and flow conditions, the pattern of the bubble flow that maximizes the efficiency in the present electric energy generation concept was found.