There are small numbers of economic feasibility studies on microalgae oil (Richard­son et al. 2009). Currently, microalgae biofuel has not been deemed economically feasible compared to the conventional agricultural biomass (Carlsson et al. 2007).

Critical and controversial issues are the potential biomass yield that can be ob­tained by cultivating macro — or microalgae and the costs of producing biomass and derived products. The basis of the estimates is usually a discussion of three param­eters: photosynthetic efficiency, assumptions on scaleup, and long-term cultivation issues. For microalgae the productivity of raceway ponds and photobioreactors is limited by a range of interacting issues.

Typical productivity for microalgae in open ponds is 30 to 50 t/ha/y (Benemann and Oswald 1996; Sheehan et al. 1998). Several possible target areas to improve productivity in large-scale installations have been proposed (Benemann and Oswald 1996; Grobbelaar 2000; Suh and Lee 2003; Torzillo et al. 2003; Carvalho et al. 2006).

Harvesting costs contribute 20 to 30% to the total cost of algal cultivation, with the majority of the cost attributable to cultivation expenses. Genetic engineering, development of low-cost harvesting processes, improvements in photobioreactor,
and integration of coproduction of higher-value products/processes are other alter­natives in reducing algal oil production costs (Chisti 2007). The harvested algae then undergo anaerobic digestion, producing methane that could be used to produce electricity.

In commercial photobioreactors, higher productivities may be possible. Typical productivity for a microalga (Chlorella vulgaris) in photobioreactors is 13 to 150 (Pulz 2001). Photobioreactors require ten times more capital investment than open — pond systems. The estimated algal production cost for open-pond systems ($ 10/kg) and photobioreactors ($ 30 to $ 70/kg) is, respectively, two orders of magnitude higher and almost three orders of magnitude higher than conventional agricultural biomass (Carlsson et al. 2007). Assuming that biomass contains 30% oil by weight and carbon dioxide is available at no cost (flue gas), Chisti (2007) estimated the production cost for photobioreactors and raceway ponds at $ 1.40 and $ 1.81 per liter of oil, respectively. However, for microalgal biodiesel to be competitive with petrodiesel, algal oil should be less than $0.48/L (Chisti 2007).

It is useful to compare the potential of microalgal biodiesel with bioethanol from sugar cane, because on an equal energy basis, sugar cane bioethanol can be pro­duced at a price comparable to that of gasoline (Bourne 2007). Bioethanol is well established for use as a transport fuel (Gray et al. 2006), and sugar cane is the most productive source of bioethanol (Bourne Jr. 2007). For example, in Brazil, the best bioethanol yield from sugar cane is 7.5 m3/ha (Bourne Jr. 2007). However, bioethanol has only approx. 64% of the energy content of biodiesel. Therefore, if all the energy associated with 0.53 billion m3 of biodiesel that the USA needs an­nually (Chisti 2007) were to be provided by bioethanol, nearly 828 million m3 of bioethanol would be needed. This would require planting sugar cane over an area of 111 million ha, or 61% of total available US cropland.

Recovery of oil from microalgal biomass and conversion of oil into biodiesel are not affected by whether the biomass is produced in raceways or photobiore­actors. Hence, the cost of producing the biomass is the only relevant factor for a comparative assessment of photobioreactors and raceways for producing microal­gal biodiesel. If the annual biomass production capacity is increased to 10,0001, the cost of production per kilogram reduces to roughly $ 0.47 and $ 0.60 for pho­tobioreactors and raceways, respectively, because of economies of scale. Assuming that the biomass contains 30% oil by weight, the cost of biomass for providing a liter of oil would be something like $ 1.40 and $ 1.81 for photobioreactors and raceways, respectively (Chisti 2007).

Biodiesel from palm oil costs roughly $ 0.66/L, or 35% more than petrodiesel. This suggests that the process of converting palm oil into biodiesel adds about $0.14/L to the price of oil. For palm-oil-sourced biodiesel to be competitive with petrodiesel, the price of palm oil should not exceed $0.48/L, assuming no tax on biodiesel. Using the same analogy, a reasonable target price for microalgal oil is $ 0.48/L for algal diesel to be cost competitive with petrodiesel.