The Whyalla City Council has approved a two year pilot project for an algal production demonstration site in the industrial estate.
The site will look to produce competitively priced biofuels derived from algae feedstock.
Whyalla City Council mayor Jim Pollock said the council was confident in the project's benefits for the Whyalla region.
"I believe this is a very exciting and interesting project with huge potential should it reach full commercial outcomes," Mr Pollock said.
In their first meeting for 2013, the council unanimously agreed to lease two hectares for the proposed two-year project.
"The project, in council's unanimous view, ticks all the boxes - employment opportunities, environmental aspects and it will put Whyalla on the map given the complexity," Mr Pollock said.
"The council has always been on the forefront securing and promoting future renewable energy project and we see this project similarly as it will reduce the carbon footprint."
Mr Pollock said if the project goes to full fruition it will create employment opportunities as well as diversify the city's industrial base.
"This project fits nicely into that category," Mr Pollock said
"Diversifying Whyalla's industry investments ensures its long-term prosperity."
"Initially we would expect it will create in the vicinity of 20 jobs but should it go to full production that could increase up to 30 jobs."
The company behind the proposal Muradel Pty Ltd, was established in 2010 as a joint venture between Murdoch University, the University of Adelaide and commercial partner SQC.
The hopes are that the project will eventuate into a large-scale commercial business that can produce salt water tolerant algae for renewable biofuels and co-products from the biomass.
Mr Pollock said a project like this was a new venture for the council but one that they strongly supported.
"It's a project that never before been seen in Whyalla and completely different to any proposals that we've discussed before council," Mr Pollock said.
"The council's found the proponents of the project very appropriate and transparent and we believe we have a formed a very solid partnership with the company."
Mr Pollock said Whyalla provided the perfect conditions for the project and hopefully other developers of projects of a similar nature will look at Whyalla as a location.
"Whyalla is the perfect site for such a proposal given the closeness to the main ingredient which is seawater and of course 301 days of sunshine which is also a strong factor," Mr Pollock said.
The initial project will see two 20 square metre ponds made and demountable buildings including a laboratory used to enable their removal at the close of the project.
"The pilot project will be of a very small nature some two hectares and will not have any environmental impact on the area or the community," Mr Pollock said.
If the demonstration site operation proves successful though, a production scale operation of up to 1,000 hectares would be developed hopefully within the Whyalla region.
"If successful the venture has the potential to offer a competitive alternative in the biofuel market and the development of a new sustainable industry within the Whyalla area," Mr Pollock said.