• SPAC model to predict forest water consumption under wet and dry conditions. • Interactions and feedbacks between physical climate and ecological processes. • Control of root water uptake by water diffusion processes between roots and soil. • Key processes involved: xylem hydraulic resistances and stomatal conductance. • Buffering action of capacitive discharge on daily fluctuations of xylem tension. Modelling hydraulic functioning of a forest stand is a prerequisite to predict the future impact of climate change on forests. In this paper, we used a process-based model of the soil-plant-atmosphere continuum to investigate the links between energy budget and water balance, and to emphasize the key processes involved in the control of transpiration and water status of forest trees. The model describes stomatal conductance as a function of photosynthesis, intercellular CO2 concentration and leaf water potential. The latter in turn depends on soil and tree storage water potentials, the water flux through the soil and the trees, hydraulic resistances and stomatal conductance. We have implemented in the model a detailed tree water storage scheme, canopy interception of precipitation, and the rate of change of forest canopy energy storage. In this model, physical climate processes and ecological processes are closely coupled which involves important interactions and feedbacks. The model reproduces the observed variation in leaf water potential in dry and wet conditions. It successfully captures the decrease in soil water content under both non-limiting soil water and severe drought conditions and there is a good agreement between measured and simulated sensible and latent heat fluxes throughout the season. Simulations also show that significant amounts of intercepted water can be lost through evaporation during rain events. The results corroborate that the concept of hydraulic capacitance provides a simple and effective means of simulating the buffering action of tree water storage on tree water status. The two key parameters that control transpiration and water status of the trees are xylem hydraulic resistances and sensitivity of stomata to leaf water potential. The results confirm that stomatal conductance cannot be modelled using leaf-level processes alone, but must be incorporated into a comprehensive model of water flow from soil through the plants to the atmosphere where various self-regulation are set up to ensure a complete water status equilibrium.