Q: iCloud Drive - Saving storage space on Mac

Not conveniently its not

You would be better served with a different service, try DropBox or one of it's imitators.

For example if I wanted to save all my photos on iCloud drive but avoid wasting space on my mac Hard drive, is it possible?

For Photos you  can use iCloud Photo Library to save storage on your Mac, provided you keep your Photos in a Photos Library.

Photos for Mac can store the full resolution versions of your photos in iCloud and only keep smaller, optimized versions for browsing on your mac. You will need an internet connection to be able to do anything with your photos however.

iCloud Photo Library FAQ - Apple Support

Can I use iCloud Photo Library to save space on my device?

iCloud Photo Library automatically keeps all your photos and videos in the original, high-resolution version. Follow these steps to choose how you store your photos and videos on your device:

• On your iPhone, iPad, or iPod touch, tap Settings > iCloud > Photos or Settings > Photos & Camera, then select a storage setting.
• On your Mac, click Photos > Preferences > iCloud, then select a storage setting.

If you turn on Optimize [device] Storage, iCloud Photo Library will automatically manage the size of your library on your device, so you can make the most of your device's storage and access more photos than ever. All of your original, full-resolution photos and videos are stored in iCloud while device-size versions are kept on your device. You can download the original photos and videos over Wi-Fi or cellular when you need them.

If you turn on Download Originals, iCloud Photo Library will keep your original, full-resolution photos and videos in iCloud and on your device. Download Originals is the default setting for iOS devices with the free 5 GB storage plan and for all Mac devices.

You can move your Photos Library to an external hard drive. Article is for iPhoto, but works with Photos.

iPhoto: Move your iPhoto library to a new location

I'll second this suggestion. Hard drives are very inexpensive now a days.

iMac using iCloud Drive?

Why do you want the photos in the cloud instead of on a local drive? I understand, if you do not want external drives connected to a laptop computer that you keep carrying around, but for an iMac  sitting on your desk a local, external drive is preferable to a cloud storage for photos.  In the long run it is much less expensive, your photos will always be available, even if your internet should be slow or not working, editing and browsing will be faster. There will be less risk of data loss by transmission errors.

And you will be in control of your photos and not depend on others to store them. Making  backups to keep them safe will also be much faster - simply include your drive with the photos into your regular Time Machine backup or make a clone of the drive with the photos.

Cloud storage for photos on a desktop computer will make sense as a secondary storage, if you want additional copies of the photos offsite as an added backup, but not as the only storage of your photos you want to be working with. Why get yourself a fast, expensive computer, if you slow it down by having to download large media files from the cloud whenever you want to work with them? I keep the originals of the photos on a second internal drive.