You have turned off location services (coarse location) but not GPS (fine location). As a technology, GPS gives better accuracy and precision, but at the cost of possibly taking longer to provide a reading, and they generally require a clear view of the sky because of how they work[0]. Google's location services have varying accuracy and precision (usually good, but sometimes way off), but return a reading almost immediately.
The reason that the UI is prompting you to wait instead of prompting you to turn on location services is because you don't need to turn on location services - you just need to wait until the GPS gets a solid reading (which could take either seconds or minutes, depending on where you are, whether you're inside or outside, etc.)
By default, Android turns on both together, and the assumption across the OS is that you're using both, because there's very little downside to doing so. I can see why that UI might be confusing to you, but if you're turning off coarse location services while leaving on the GPS, you're not really using the device the way it's intended (nor the way that it defaults to being used), so I can see why the UI isn't tailored for that use case.
For what it's worth, in your case, I'm puzzled by why you would want to leave GPS on but location services off. You mention battery life, but since the former is the one that is a larger draw on the battery (and as I mentioned before, neither one is a major draw on the battery as much as the lock is), you'd probably be much happier leaving both on all the time (or to leave location services on but turn the GPS off[1]).
[1] For most mobile applications, GPS is actually overkill and the coarse location services will probably suffice. The only time I've ever needed the precision that the GPS provides is when I need turn-by-turn directions.
