I'm not an expert on the subject but I think it's a bit of a balancing act - undervolting reduces the power to the chip so it produces less heat and can sometimes be more efficient as a result. But if you go too far, it won't have sufficient cpu/gpu power and the framerate will suffer. Overclocking works in the other direction.
this post was submitted on 05 Jul 2023
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To add to this, a lot of times chips use more voltage than is actually necessary to ensure stability across the silicon lottery, but more often than not they can run with much lower voltages and still perform fine with certain workloads. This could be what's happening here as well.
Another thing is that the OS CPU governor could just be a bit overzealous by default and clocking it at frequency that's way higher than it needs to be to run a certain game. On my desktop Arch machine with a Ryzen 3900x, a lot of times I see a CPU core boosting to max frequency even though the CPU load for that core is only 50%. Reducing TDP helps to bring that frequency back down.
It's pretty game dependent, but when capped at 40 fps you can get away with lower power draw because it's less demanding on the hardware to run at 40 vs 60.
I do this with lots of games, cap somewhere between 40-50hz depending on how demanding the game is, then find the lowest tdp I can run with the game still having a stable frame rate. Great way to save on battery life.