Toward identifying the driving force of protein folding, energetics was analyzed in water for Trp-cage (20 residues), protein G (56 residues), and ubiquitin (76 residues) at their native (folded) and heat-denatured (unfolded) states. All-atom molecular dynamics simulation was conducted, and the hydration effect was quantified by the solvation free energy. The free-energy calculation was done by employing the solution theory in the energy representation, and it was seen that the sum of the protein intramolecular (structural) energy and the solvation free energy is more favorable for a folded structure than for an unfolded one generated by heat. Probabilistic arguments were then developed to determine which of the electrostatic, van der Waals, and excluded-volume components of the interactions in the protein-water system governs the relative stabilities between the folded and unfolded structures. It was found that the electrostatic interaction does not correspond to the preference order of the two structures. The van der Waals and excluded-volume components were shown, on the other hand, to provide the right order of preference at probabilities of almost unity, and it is argued that a useful modeling of protein folding is possible on the basis of the excluded-volume effect.