Australian advanced renewable oil from algae firm Algae.Tec has inked an agreement with Macquarie Generation for the development of an algae carbon capture and biofuels production facility.

As per the agreed terms, the company will construct the proposed facility, next to Macquarie’s 2640MW Bayswater coal-fired power station in the Hunter Valley New South Wales.

Commenting on the deal, New South Wales Energy Minister Chris Hartcher said that the deal will enable the company to capture and reuse carbon emissions at the coal-fired plant to generate clean fuel.

According to the company, the algae will feed on waste carbon dioxide emitted by the power station and the resulting algal oil is converted to biodiesel and hydrogenated to grade A jet fuel.

Macquarie Generation CEO and managing director Russell Skelton said, "Our agreement with Algae.Tec is another example of MacGen finding creative ways to improve our business and improve our environmental performance."

"Its new technology is improving a traditional power plant.

"Carbon is now our single largest cost. This technology should reduce our carbon output, reduce our carbon bill, and at the same time improve our bottom line."

Currently, Bayswater uses around 7.5 million tons of coal annually and generates power that is supplied to Eastern Australia, from South Australia to Northern Queensland.