Developing an efficient photobioreactor (PBR) and reducing freshwater dependence are among the significant challenges for generating 3rd generation biomass feedstock. Addressing these, the present study focused on developing a modified airlift (MoAL) PBR. Its performance was further evaluated and compared with the traditional airlift PBR by cultivating microalgae in dark fermentation spent wash. Lower mixing time and higher interfacial mass transfer coefficient was observed in the MoAL PBR having a perforated draft tube. Experimentally, the MoAL exhibited the maximum biomass concentration of 3.18 g L-1, which was 30% higher than that of the conventional airlift PBR. The semi-continuous operation of the MoAL (with water recycling) achieved the maximum biomass productivity of 0.83 g L-1 d-1, two folds superior to that of batch culture. The comprehensive biomass characterization (proximate, ultimate, and thermochemical) further confirmed its potential for bioenergy application. Considering that, hydrothermal liquefaction of the biomass resulted in a maximum biocrude yield of 31% w/w with a higher heating value (HHV) of 36.6 MJ kg-1. In addition, the biocrude comprised 66.6% w/w lighter fraction (<343 °C), including 21.5% w/w of heavy naphtha, 20.5% w/w of kerosene, and 24.6% w/w of diesel. The results can help develop sustainable technology for simultaneous wastewater remediation and biocrude production.