Recently, the depletion of fossil fuels has become an issue, prompting the search for sustainable alternatives. Algal biomass has gained considerable attention as a promising renewable energy source because of its high production efficiency and adaptability to external environment. However, its high‐moisture content escalates the energy requirement during the thermal drying process in algal biomass production. Thus, we proposed a new energy production system using hydrothermal carbonization, which requires no pretreatment even for high moisture content biomass, making it compatible with such materials. Herein, we investigated the decrease in moisture content of algal biomass through hydrothermal carbonization and its effect on the energy production and energy balance of algal biomass. The results showed that hydrothermal carbonization at 240°C for 3 h produced hydrochar with a moisture content of 34.6%. It was found that it was due to changes in surface structures, such as CH, CO, and OH functional groups, using scanning electron microscopy (SEM) and Fourier transform infrared (FT‐IR) analysis. However, the greatest reduction in production energy, 45%, was achieved at 240°C for 4 h. The optimal energy balance was obtained for hydrothermal carbonization at 220°C for 4 h, for which energy production was 2.7 times more efficient than that achieved by conventional methods.