By Tracy Rucinski

CHICLANA DE LA FRONTERA, Spain (Reuters) - A Spanish resort town with sprawling golf courses and tree-lined beaches has added another green site to its attractions: the world's first plant to convert sewage into clean energy.

The facility in Chiclana de la Frontera on the southwest tip of Spain uses wastewater and sunlight to produce algae-based biofuel as part of a 12 million euro ($15.7 million) project to pursue alternative energies and reduce reliance on foreign oil.

The use of algae for biomass, once touted by U.S. President Barack Obama as the fuel of the future, has been written off by some critics who say the large quantities of energy, water and chemicals needed to produce it makes the process unsustainable.

The project in Chiclana, called All-gas to sound like "algas" or seaweed in Spanish, seeks to prove otherwise, becoming the first municipal wastewater plant using cultivated algae as a source for biofuel.

While industries such as breweries or paper mills have produced biogas from wastewater for their own energy needs, All-gas is the first to grow algae from sewage in a systematic way to produce a net export of bioenergy, including vehicle biofuel.

"Nobody has done the transformation from wastewater to biofuel, which is a sustainable approach," said All-gas project leader Frank Rogalla, standing outside a trailer-laboratory set up beside an algae pond at the waste treatment site in Chiclana.

Carbon dioxide is used to produce algae biomass, and the green sludge is transformed into gas, a clean biofuel commonly used in buses or garbage trucks because it is less polluting.

All-gas' owner Aqualia is the world's third largest private water company. It is owned by loss-making Spanish infrastructure firm FCC which is betting on its environmental services business to relieve pain from a domestic construction downturn.

While energy efficiency projects have gained pace in other European countries, Spain has been held back by a yawning budget gap that was at the centre of concerns the country would need an international bailout last year.

The All-gas project is three-fifths financed by the European Union FP7 program to determine the effectiveness of the methane produced from algae-derived biomass in cars and trucks.


The Chiclana plant, still in a pilot phase and 200 square meters in size, harvested its first crop of algae last month and expects to fuel its first car by December.

All-gas expects it to be fully up and running by 2015, when it aims for 3,000 kg of algae on 10 hectares of land, roughly 10 football fields, to generate annual biofuel production worth 100,000 euros - that's enough biofuel to run about 200 cars or 10 city garbage trucks a year.

Spain is battling a record 27 percent unemployment rate, with the south worst affected, and cash-strapped consumers have struggled under the weight of wage cuts and tax hikes over the past two years aimed at reining in the public deficit.

Chiclana, which relies on tourism and salt-processing fields for its livelihood, was chosen for the site because of its ample sunlight and a long stretch of land that runs along oceanside salt fields where algae can be easily grown in man-made ponds.

All-gas says its sewage plant is over 2 million euros cheaper to set up and run than a conventional sewage plant.

But whether the project is able to fuel cars on a large scale will depend on the amount and quality of bioethanol it can eventually produce, and at what cost.

Researchers so far have concluded that it may take years before algal biofuels are economically viable, though they may eventually be able to replace some portion of petroleum.

The All-gas model has drawn interest from other efficiency-minded municipalities in southern Spain with populations between 20,000 and 100,000 and with enough land to develop the algal ponds, said Rogalla, who has identified at least 300 small towns where such projects could work.

Aqualia has also had contact with Brazil, the United Arab Emirates and a French company over the possibility of building and operating similar water treatment plants under a concession.

Rogalla is optimistic.

"The opportunity is such that 40 million people, roughly the population of Spain, would be able to power 200,000 vehicles from just flushing their toilet!" he said.

(Reporting by Tracy Rucinski; Editing by Pravin Char)

[Algae colonies are pictured with a digital camera through a microscope after being collected from a tank at a waste-water treatment plant in Chiclana de la Frontera, near Cadiz, southern Spain June 6, 2013. REUTERS/Jon Nazca]