A European Union-backed project to produce biofuels from algae moved a step forward on Thursday by producing its first crop of algae biomass at its site in southern Spain.

The "All-gas" project will cultivate fast-growing micro-algae by using the nutrients in wastewater and then by further processes generate biomethane which can be captured and used in transport fuel.

The biomass obtained from the algae crop showed high energy potential with a methane production capacity of 200-300 liters of gas per kilogram of biomass processed, water company FCC Aqualia said.

"This original new approach to bioenergy means that Spain's 40 million population could power 200,000 vehicles every year with a single toilet flush," said Frank Rogalla, the project's coordinator and director of innovation and technology at FCC Aqualia.

Some 7.1 million euros ($9.46 million) of the scheme's initial 12-million-euro development funding came from the EU, which is aiming for 10 percent of its energy used in transport to be derived from renewable sources by 2020.

It is hoped algae biofuels will eventually help ease the pressure that land-intensive biofuel crops, such as palm oil, put on output and prices of food crops.

However, development is still at a very early stage, there is no large-scale production in Europe.