The University of California, Berkeley has been selected to lead a project which addresses the water-related aspects of energy production.
It is part of the US-China Clean Energy Research Centre (CERC), which aims to boost collaborative efforts to ensure energy, water and environmental security and combat climate change.
The US team will be formed of universities, not-for-profit organisations, utilities and national laboratory partners and will work in partnership with their Chinese counterparts.
They will use innovative technologies, modeling capabilities and analytical research to explore and improve water use reduction at thermoelectric plants, sustainable hydropower design and operation.
They will also research scenarios to support improved understanding of energy and water systems and aims to reduce climate impact.
The US and China are both investing $25 million (£16m) each in the project over five years.
US Energy Secretary Ernest Moniz said: “Addressing the impact of water resource scarcity and variability on energy systems in the US, China and around the world will require collaborative efforts like CERC to develop technical solutions.”