Forget cellulosic ethanol: If you’ve been following the biofuel sector lately, you probably already know that algae is the hot new game in town. New Zealand-based Aquaflow Bionomic may be getting close to achieving its goal of becoming the world’s first company to viably produce large amounts of biofuel from wild algae.

Barrie Leay, Aquaflow’s chairman, said his company had successfully achieved “commercial-scale continuous harvesting of tons of wild algae” in a recent interview with Ethanol Producer Magazine. He outlined what he believed will become the new energy model -– “distributed” production –- which would do away with the inefficiencies he believes are inherent in the central plant model used by both the oil industry and ethanol producers.

In practice, this means Aquaflow would seek to spread its algae-to-biofuel production process over many harvest areas -– typically 1,000 acre oxidation ponds located around the U.S. The company’s existing facilities are churning out several tons of algae a day, a number it aims to rapidly scale up over the coming months as it invests in larger biorefineries.

Aquaflow’s two-step process consists of first optimizing the ponds’ productive capacity and then harvesting the algae, producing an extract ready to be converted into a usable biofuel. By taking up all the available nutrients in the ponds, the algae help clean the water, making it available for irrigation, various treatment processes and industrial washing and cooling. Aquaflow is also developing a bio-remediation process that could eventually be used to make the water drinkable.

Leay revealed little in terms of the conversion processes and their costs, likely for competitive reasons. However, there is some reason for concern as the company attempts to scale up production. Another algal biofuel maker that aimed for rapid growth, GreenFuels, ran into major problems last year when it tried to scale up, resulting in the company laying off half its workforce. Other companies have faced similar setbacks. Algae are notoriously difficult to grow in the wild because they need just the right amount of light and temperature; getting them to grow quickly requires a large amount of carbon dioxide and nutrients, and they are prone to succumbing to invasive species, or dying off en masse as a result of overcrowding.

Aquaflow disclosed earlier this year that it was seeking $5 million to continue improving the refining process; its technology has garnered interest from investors in the U.K., U.S., Australia and Asia. It is currently in talks with Boeing to develop an algae-based jet fuel. Its next step is to begin commercial-scale production, which Leay expects to do within the next few months.

Other companies working on producing algal biofuels include Solazyme, which recently some venture funding and debt (coverage here and here ), LiveFuels and Aurora Biofuels. Unlike Aquaflow, most of these companies are choosing to engineer their own proprietary algae strains, in an attempt to avoid many of the problems laid out above.