Storage (iCloud, iPhone) moving to lower storage device

With "optimise Storage" enabled the iCloud Photos Library can be reduced to 10% to 20% of the size used in iCloud. It will depend on the format of the image files and videos how much optimisation is possible. If you can afford to use 32GB on the iPhone for photos, you could sync an iCloud Photos Library of 320GB without any problems.

To create a copy of your iCloud Photos Library on your Mac, that has the same albums and structure as the Photos Library on your iPhone and in iCloud, get yourself an external drive with enough free storage to hold the complete library (if you do not have enough free storage on your MacBook Air). Or create a new library on your Macs system volume, if space permits.

• Create a new, empty Photos Library on the external volume. To create the new library, quit Photos if it is running. Hold down the options key ⌥ while launching Photos again and select to create a new library, when the library chooser dialog appears.
• Make the new library your System Photos Library (in Photos > Preferences > General) and then your iCloud Photos Library in (in Photos > Preferences > iCloud) . Do not enable "optimise Mac Storage in the Photos > Preferences > iCloud . You will want to download all photos in the full resolution, so you can make regular backups of your Photos Library.

Once the library on your Mac is syncing with iCloud Photos, the iCloud syncing will download an identical copy of what you have been seeing on your iPhone, with all albums, folders, named faces and places. It will take a few days for the photos and albums to download from iCloud.

Once you have saved your iCloud library on your Mac, copy it to an external volume to keep it safe. Then you can weed out the Mac library syncing with iCloud to free storage in iCloud and on your iPhone, if you really are worried about the photos taking up too much storage on your iPhone.

When you talked with Apple Support, have you been discussing the "Optimize iPhone Storage" feature?

My iCloud Photos Library has a size of 250GB, but I never had a problem to use iCloud Photos on my older iPhone 5s with only 64GB storage. I just had to enable "Optimize iPhone Storage" for the iCloud Photos Library. It should really not be a problem to. access your iCloud Photos Library with 150GB from an iPhone with128GB storage, as long as you enable "Optimise Storage" and the device is only downloading smaller, optimised versions of the photos you have not used in a long time.

But follow Ronasara's advice and keep a local copy of the full library on your Mac. You can easily keep this local library on an external volume with enough free storage, without using the Optimise Storage feature on the Mac. And then make regular backups of this library with Time Machine. Using an external volume for the Photos Library is described here: Move your Photos library to save space on your Mac - Apple Support

I have a couple of comments to share which may be useful. First, it is important to know that iCloud is NOT a storage function. It does have some storage features, but is mirrors your devices. It is an app/feature which is designed for sharing across your devices. Using it as a storage invites a situation when your data could be lost. For storage, you need to have an external device to store to. Then you can either use Time Machine to do the backup for you, or a similar app to do the backup. Or you can do it manually yourself. There are also web based backups available which you can subscribe to. Some can have costs associated with them. These days, external disks have become very cost effective. They are easy to install with provided USB cables and are very compact. Most do not require any external power. Keep in mind that eventually all hard drives will fail, so it is important to have your data backed up. That said, you might also want a second external drive just to store your photos on. Just some things to think about.