Algae Systems LLC announced it has completed demonstration of a new biofuel production approach this month with Japan’s IHI Corp. A demonstration plant in Daphne, Ala., combines wastewater with algae to produce what the company says is the world’s first energy-generating wastewater treatment process, using carbon-negative technologies to yield biofuel and drinking water.

Algae Systems says its systems approach at Daphne takes local strains of algae to increase production rates and optimize wastewater treatment opportunities. Floating membrane photobioreactors accept wastewater—up to 40,000 gallons per day—from a local community municipal wastewater utility, drawing nutrients from the wastewater to promote algae growth. The algae consume nutrients in the wastewater, reducing the cost of water treatment.

The company says it has also demonstrated a new, proprietary technology for conversion of wet algae and other biomass feedstocks into biocrude oil, which it has then upgraded into diesel, jet and gasoline. The U.S. DOE recently announced that a research consortium coordinated by Algae Systems and led by SRI International will receive $3.2 million in grant funding in 2014 to advance this hydrothermal liquefaction process.