Robert Rapier has an important post on the prospects for algal biodiesel:
[Algal biodiesel] will be subject to the Law of Receding Horizons, which simply means that energy sources that require high energy inputs will always see their point of economic viability pushed farther out as energy prices rise. Remember when oil was $20 a barrel, and oil shale was going to be viable at $40 oil? By the time oil got to $100, I was hearing that it would be viable at $120 oil.
This won’t stop people from throwing money at algal biodiesel. As John Benemann once said to me “This is a good research project, but nowhere close to commercialization.” Somehow, I don’t think this is the reason investors are throwing their money in that direction. They are falling victim to the hype of ‘the next big thing.’