Algae Tec has signed an agreement with Macquarie Generation, which is owned by the New South Wales Government, to site a $150 million algae carbon capture and biofuel production facility alongside the Bayswater coal-fired power plant.

The Bayswater power station in the Hunter Valley uses around 7.5 million tonnes of coal per year to deliver 2.6 gigawatts of power.

CO2 produced by the plant will be used to feed the algae, which converts it into oxygen and algal oil that can be processed into biodiesel and jet fuel.

The plant is expected to produce around 50,000 tonnes of oil in its first year year, increasing to as much as 250,000 tonnes over three years.

Algae Tec hopes that the technology will be licensed to other sites in Australia and internationally.