Algae to Liquid Biofuels – State of Industry and Technology Literature Review

Report no. 3/25: Decarbonizing transport is crucial for Europe’s GHG reduction goals, with biofuels expected to play a key role, particularly in aviation and maritime sectors, where electrification is challenging. Among the Annex IX biofeedstocks in the Renewable Energy Directive (RED), algae initially drew interest due to their rapid growth and CO₂ utilization. However, economic and technical barriers have hindered commercialization. In Europe, algae production is mainly for food, feed, and cosmetics, while biofuels remain at an experimental stage. This report reviews the state of the algae industry, evaluating the economic feasibility, and sustainability performance of different algae-to-liquid biofuel pathways.

Algae are categorized into macroalgae and microalgae based on their cellular structure. Macroalgae, commonly rich in carbohydrates, have been mostly explored for ethanol production, but conversion efficiencies are low (<10%), with a statistically averaged minimum ethanol selling price of 1.4 €/L, based on the available techno-economic publications. However, the limited research on macroalgae pathways makes these economic estimates uncertain.

Microalgae, which can accumulate lipids (typically 20–45 wt%), are more relevant for biodiesel production via lipid extraction followed by transesterification or for renewable diesel and sustainable aviation fuel (SAF) via direct hydrotreatment of extracted oil. However, large lipid concentrations constrain biomass productivity and seasonal variations in composition occur. For this reason, there has been a growing interest in hydrothermal liquefaction (HTL) alternative, a non-lipid-targeting thermochemical process, which does not require energy-intensive drying before processing.

Techno-economic studies indicate that biofuels from microalgae are significantly more expensive than oil-based and lignocellulosic biofuels. After harmonizing key technical and economic assumptions across various techno-economic models, the statistically averaged minimum fuel selling price (MFSP) is 2.2 €/L for lipid extraction routes and 3.4 €/L for HTL. However, these figures are based on future algae productivity targets (a standardized biomass productivity of 25 g/m²-d) set by NREL, rather than current technological capabilities. With the highest state-of-the-art productivity at 18.6 g/m²-d, actual fuel prices would be higher. The upstream processes, including microalgae production and harvesting, are identified as the primary cost bottlenecks. Strategies to improve competitiveness include increasing productivity to 25–30 g/m²-d and enhancing lipid yields (~50%). Additionally, multi-product biorefineries, co-producing polyurethane and other valuable chemicals, have been explored as a strategy to improve biorefinery economics, but the relatively smaller market size of these co-products could be a challenge for large-scale commercialization.

According to the literature, GHG emissions vary widely depending on the accounting methodology and biorefinery setup, particularly in how co-products and their credits (e.g., electricity, fertilizers) are accounted for. Achieving GHG reductions comparable to lignocellulosic biofuels remains challenging, primarily due to the high energy demand of algae cultivation and harvesting. Due to the lack of a consistent GHG calculation framework, further research is needed to establish a harmonised GHG accounting approach (aligned with RED), and the exploration of more sustainable solutions, such as integration with renewable energy infrastructure (e.g., solar panels), is recommended.