This paper presents a novel power converter design optimized for 5 kW micro hydrokinetic turbine applications to address these challenges. The proposed design enhances electrical and thermal efficiency by utilizing SiC power MOSFETs. This study evaluates several converter topologies and semiconductor devices, comparing their conversion efficiency and case temperature through multi-physics HKT average modeling. Based on these evaluations, a two-level SiC-based voltage source inverter is selected and uniquely designed to enhance electrical efficiency, improve thermal management, and reduce the failure rate. The efficient power converter layout allows the DC bus capacitor to be placed onshore, with smaller parallel capacitors within the offshore HKT unit. This compact design is crucial for HKT applications. Hardware experimental results demonstrate that the developed SiC-based power converter achieves 98.4% efficiency at the rated 5 kW power output, with a maximum device case temperature of approximately 55.1°C under natural conduction cooling.