In the 1990s, early research into algae biofuels stagnated as oil prices dropped and funding was siphoned off to cancer, AIDS and bioethanol studies, Kay said. Algae is now making a comeback, buoyed by the eco-friendly movement and concerns about dependence on traditional fuels. But the slimy stuff is no magic wand, experts say.
Expecting algae to make a meaningful dent in fossil fuel usage is still a tall order, experts said. The algal biofuel production process is often lambasted as inefficient by other biofuel competitors.
"We can certainly come very close, but we're not there yet and I'm not sure when we'll ever get there," said John R. Benemann, an algae biofuel consultant with Benemann Associates in Walnut Creek. "It's a significant challenge to get down to the price point, or even just the ballpark of fossil fuels."
The problem is translating successful lab experiments to an industrial scale. Mass algae biofuel production could require enormous pools or photobioreactors while growing a proportionally small amount of algae. Technology needs to be developed to systematically extract the oil from the organisms.
Algae-generated oil currently costs $20 to nearly $33 a gallon to produce, with some estimates soaring to $60. Conventional gasoline costs less than $5 a gallon.
"There's a valley of death between research and development and commercial development," said Lisa L. Mortenson, chief executive of Community Fuels in Encinitas.
Add California's heavy regulations, and algae biofuel production becomes an even more difficult business proposition, some complained.
Biofuel companies often have to wade through a tangle of permits, taxes and compliance measures in California. Aquaculture alone requires more than 15 permits, with more for waste disposal and water use.
The intensity of the algae hype is making some investors wary.
"The majority [of the efforts] are a gigantic hassle of time and capital because they're trying to make coal out of diamonds," said David Andresen, a clean-tech investment banker at Oracle Capital Securities. "There's such a high level of scientific illiteracy in the investment community that you can really wow investors."
Still, even Andresen is an investor in the industry, working with Kai BioEnergy Corp., a San Diego company named after the Hawaiian word for "ocean."
Although Kai can produce only about 20 gallons per minute while it needs 300 gallons a minute to be commercially viable on a large scale, Chairman Mario C. Larach is optimistic.
"It's just a matter of scaling at this point," he said. "If nature can do it, we can do it."
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A sampling of algae biofuel companies in the Southland
* Biolight Harvesting Inc. of San Diego develops fuels and chemicals from blue-green algae, or cyanobacteria.
* Kent Bioenergy Corp. of
San Diego originated as a company that bred hybrid striped bass in the 1970s. Before producing algae for energy, the company used it to clean water in its fish pens.
* Carbon Capture Corp. of La Jolla uses carbon dioxide from sources including power plants to grow algae for biofuel.
* Sapphire Energy of San Diego produces "green crude" from algae that can substitute for crude oil and has raised more than $100 million from investors including Bill Gates of Microsoft Corp. Its algae fuel helped power a Continental Airlines test flight this year.
* General Atomics of San Diego, known for producing the Predator unmanned aircraft, received a $19.9-million military grant in December to research ways to drive down the costs associated with algae jet fuel production.
* Synthetic Genomics Inc. of La Jolla was foundedin part by J. Craig Venter, whose previous company, Celera Genomics, spearheaded the effort to map human genes. The company will pair with Exxon Mobil Corp. in a $600-million venture.
* OriginOil Inc. of Los Angeles has a Quantum Fracturing process that helps break down algae cell walls in order to extract oil.
* Scipio Biofuels Inc. of Aliso Viejo is a year-old company developing a "closed photobioreactor" system for algae to be used in large-scale plants and in smaller systems for specific industries such as trucking or airports.
* Science Applications International Corp. of San Diego will use a military contract potentially worth $25 million to develop a cost-effective algae-based jet fuel.
* Kai Bioenergy Corp. of San Diego has a patented technology for the cultivation and processing of microalgae to produce bio-oil.
* American Biodiesel Inc., doing business as Community Fuels in Encinitas, owns one of the state's largest biodiesel plants and has branched into algae development.
Sources: Biofuels Digest, Times research