The development of photosynthetic microbes that produce lipids or hydrocarbons also has great potential for biofuels production. While plant production of useable biomass is unlikely to exceed an overall solar conversion efficiency of 1-2 percent, algae can convert solar power at efficiencies in excess of 10 percent. A combination of anaerobic and aerobic microbial processes can be separately optimized so that a fuel precursor can be produced in an anaerobic environment and the final product in an aerobic setting. Efficient algae cultivation that would take full advantage of the high quantum efficiency of these microorganisms would, however, require capital intensive infrastructure.

Algae are the fastest growers of the plant kingdom. When photosynthesizing, certain species can produce and store inside the cell large amounts of carbohydrates and up to 50% by weight of oil as triglycerides. The conversion of algae oil into biodiesel is a similar process as for plant oils based on esterification of the triglycerides after extraction, but the cost of producing algae oil is relatively high at present.

Algae can be produced continuously in closed photo-reactors but oil concentration is relatively low and capital costs are high. To collect the biodiesel feedstock more cheaply would need high volumes of algae to be cultivated in large facilities at low cost, hence the interest in growing the algae in open ponds, including sewage ponds where nutrients are in abundance and the sewage is partly treated as a result. In practice a problem is contamination of the desired culture by other organisms that limit algal growth. A combination of closed and open systems is a possible option. The algae are initially grown in closed reactors under controlled conditions that favor continuous cell division and prevent contamination. A portion of the culture is transferred daily to an open pond whereit is subjected to stress and nutrient deprivation. This stimulates cell concentration and oil production within a short residence time before contamination can occur.

Catabran and Auresenia (2010) studied five algal strains found in the Philippines to determine their potential for the production of biofuels. The following algae species were used: Hapalosiphon welwitschii, Nostoc commune Anabaena laxa, Anabaena variabilis, and Chlorella sorokiniana. The optimal conditions for growing the algae strains were determined. It was found that their relative rate constants are: 0.2567 (N. commune), 0.1845 (H. welwitschii), 0.4359 (A. variabilis), 0.3372 (A. laxa), and 0.4359 (C. sorokiniana). Their mean doubling times were measured as follows: 2.7 days (N. commune), 3.76 days (H. welwitschii), 1.59 days (A. variabilis), 2.056 days (A. laxa) and 1.59 days (C. sorokiniana). The results showed that the fastest growing algae were A. variabilis and C. Sorokiniana.

Their cetane numbers were predicted from their fatty acid methyl ester profile: 48.74 (N. commune), 53.06 (H. welwitschii), 59.21 (A. variabilis), 49.09 (A. laxa) and 46.40 (C. sorokiniana). The algae strain with the highest predicted cetane number was A. variabilis. The optimum operation conditions to yield the highest biomass productivity rate were determined to be 24 light hours in the photoperiod, 30 watts of light intensity and 1.0 L/min of air flow rate. The fatty acids contained in the algae strains were found to be suitable for use as biodiesel feedstock based on the predicted cetane number.

Macaraig, L.C. et al (2010) examined the optimization of a light emitting diode-based photobioreactor system for the production of the eicosapentanoic acid-producing algae species Nannochloropsis oculata sp5. The parameters examined were lighting, plant nutrients, carbon dioxide feed and growing conditions that could maximize total algal biomass yield. The experiments showed that certain wavelengths of light affected different stages of algal growth. Algae cell size was found to increase when algae was exposed to light at 680 nm, whereas algae cell production was found to increase under light at 470 nm. The marine Nannochloropsis species was also found to survive in fresh water media at temperatures lower than 35ºC and was generally stable at brackish salinities of 15-23%. Photoperiods with longer light exposure was found to favor the growth of N. oculata. Work on carbon dioxide feed done through the bicarbonate pathway was found to be more efficient than bubbling pure carbon dioxide and was as effective as bubbling compressed air.

Perez and Josol (2010) studied the effect of light intensity and nitrogen concentration on the growth and lipid production of Chlorella vulgaris6. The results of his experiments showed that different levels of light intensity significantly affected growth and lipid production (p<0.05). The highest optical density, highest proliferous rate (0.08 per day), and shortest generation time (3.79 days) were observed at 2,700 lux while the highest lipid yield was observed at 800 lux. Although nitrate concentration did not significantly affect growth and lipid production, nevertheless the highest lipid yields occurred at concentrations of 1.5 g/l and 0.15 g/l of nitrate. The results also showed that it was in the stationary phase that the most amounts of biomass and lipids were harvested. The experiments showed that the optimum conditions for growth and lipid production of C. Vulgaris were at 800 and 2,700 lux in the presence of 1.5 g/l and 0.15 g/l of nitrate.

Numerous other studies are currently being undertaken worldwide in universities and research centers to determine optimum conditions for the production of oil from micro-algae. The results are promising since these studies show that the projected micro-algae oil yield per hectare can be 16 times higher than palm oil and up to 100 times higher than for traditional plant oil crops grown in soil. In addition, algae also consume 99% less water. Nevertheless, there are still great technical and economic challenges that will need to be overcome before micro-algae become a viable commercial source of fuel oil. For example, to produce large oil volumes, it will be necessary to have large surface areas of ponds. This requires very high capital investment. However, one specific application that is rapidly being developed is the use of algae to clean flue gases from coal-fired power plants. Since algae absorb carbon dioxide, the injection of carbon dioxide from fossil-fueled thermal power plants could be used to enhance growth. The application of this system could make coal-fired power plants more environmentally friendly while addressing the need to produce carbon neutral biofuels.