Deakin University has begun operating a commercial-scale pilot plant that grows algae in municipal wastewater, simultaneously treating the water and producing biomass that can be converted to biofuels or other valuable products.

The facility in Geelong processes 100,000 litres of wastewater daily, producing about 500 kilograms of dried algae biomass weekly. That’s still small compared to industrial wastewater treatment plants, but it’s large enough to generate meaningful economic and environmental data.

Professor Sarah McKenzie, who leads the project, said combining wastewater treatment with biofuel production addresses the main obstacle to algae-based fuels. “Growing algae for fuel typically requires too much energy and resources to compete with petroleum. But if you’re treating wastewater anyway, the algae become a valuable byproduct rather than the main product.”

Algae-based biofuels have been promoted for decades as a potential renewable fuel source. Algae grow much faster than terrestrial plants, can be cultivated on non-arable land, and produce oil-rich biomass suitable for biodiesel or jet fuel production.

But economics have never worked. Most demonstration projects spent more money producing algae than the resulting fuel was worth. Several high-profile startups that raised hundreds of millions in venture capital ended up failing or pivoting to higher-value products like nutritional supplements.

The Deakin approach is different because it generates revenue from wastewater treatment services while producing algae as a co-product. Municipal wastewater treatment plants are paid by local governments to treat water, and they already spend money on biological treatment processes that consume oxygen and nutrients.

Algae-based treatment uses photosynthesis to consume nutrients while producing oxygen and biomass. In theory, this should be cheaper than conventional activated sludge treatment, which requires energy-intensive aeration. In practice, algae-based systems face challenges with seasonal variations, temperature control, and harvesting efficiency.

The Deakin pilot plant uses raceway ponds where wastewater flows through shallow channels while algae grow. Paddlewheels keep the water moving, preventing algae from settling and ensuring even exposure to sunlight.

Harvesting is the most challenging part. Algae cells are microscopic and suspended in water, making separation energy-intensive. The pilot plant uses a combination of flocculation, where chemicals cause algae to clump together, and centrifugation to separate biomass from water.

The harvested algae contains about 30-40% lipids (oils) by dry weight, comparable to oil-bearing crops like soybeans. These lipids can be extracted and converted to biodiesel through standard transesterification processes.

Remaining biomass after oil extraction still has value as animal feed, fertilizer, or feedstock for anaerobic digestion to produce biogas. Capturing multiple value streams improves overall economics.

The pilot plant has operated for 18 months, demonstrating that algae can reliably remove nutrients from wastewater year-round. Nitrogen removal exceeds 80% and phosphorus removal exceeds 70%, meeting regulatory standards for treated wastewater discharge.

Water treatment performance varies seasonally. Winter temperatures slow algae growth, reducing treatment capacity. The plant addresses this by maintaining larger algae populations in winter, though this reduces biomass harvesting rates.

Economic analysis suggests the combined wastewater treatment and biofuel production could operate at about $0.85 per cubic metre of water treated, comparable to conventional treatment. That doesn’t account for revenue from biomass sales, which could make the process significantly cheaper.

But biomass value depends heavily on markets. Biodiesel prices fluctuate with petroleum prices, and animal feed markets have quality standards that algae-based feed doesn’t always meet. Finding reliable buyers for algae biomass has been a persistent challenge for commercial projects.

Barwon Water, Geelong’s water utility, is collaborating on the pilot plant because they’re interested in upgrading their treatment facilities. If algae-based treatment proves reliable and cost-effective, they might incorporate it into future infrastructure.

That would represent a significant validation of the technology. Water utilities are conservative organisations that don’t adopt new technologies without extensive proof of reliability. A commercial deployment by Barwon Water would likely encourage other utilities to consider similar systems.

The research received $6 million in funding from the Australian Renewable Energy Agency (ARENA) and commercial partners. ARENA’s interest reflects the potential for algae-based fuels to contribute to aviation decarbonisation, where sustainable liquid fuels are needed because battery electric planes aren’t practical for long flights.

Several airlines have committed to using sustainable aviation fuel (SAF) to reduce emissions. Current SAF mostly comes from used cooking oil and agricultural waste, but these feedstocks are limited. Algae could potentially provide much larger SAF volumes if production can be scaled economically.

Whether that happens remains uncertain. The Deakin project demonstrates technical viability but hasn’t yet proven commercial viability at the scale needed for significant fuel production.

Specialists from business AI solutions firms have noted that algae biofuel economics improve significantly if multiple revenue streams can be optimised simultaneously through better monitoring and control systems. Advanced sensors and data analytics can help maximise both water treatment performance and biomass production.

The pilot plant is now testing different algae strains to identify those with optimal growth rates, nutrient removal capabilities, and lipid content. Genetic diversity in algae is enormous, and most species have never been systematically evaluated for biofuel production.

Some researchers are also exploring genetic engineering to enhance algae characteristics, though genetically modified organisms face regulatory and public acceptance challenges. Selection of naturally high-performing strains might be more practical.

The next phase involves scaling to 500,000 litres daily throughput, moving closer to the size of small wastewater treatment facilities. That scale-up is scheduled for 2026, assuming the current pilot continues performing well.

Whether algae-based wastewater treatment and biofuel production achieves widespread adoption in Australia probably depends more on policy support than technical performance. If governments implement carbon pricing or renewable fuel mandates that make biofuels economically attractive, deployment could accelerate quickly.

Without such policies, algae biofuels will struggle to compete with cheap fossil fuels, regardless of how well the technology works.