Algae biofuels have been one of several beacons of hope for those looking to reduce or end our dependence on oil. In fact last year the DOE gave $24 million to a partnership between Shell Oil and HR Biopetroleum for reseach in algae biofuels.

Now it seems that Shell has dropped that direction of research stating that “In keeping with Shell’s portfolio approach to the research, development and commercialization of advanced biofuels, this decision will allow Shell to focus on other options that have shown a better fit with Shell’s biofuel portfolio and strategy.”

With a major player like Shell deeming algae-based biofuels a dead-end, does that mean that the algae biofuel dream is dead? Not necessarily. These does seem like the nail in the coffin of lipid-based algae biofuels that require the process of separating the algae from the fuel. The conversion of Algae to ethanol may still prove to be a viable alternative fuel production method for the foreseeable future.

The Department of Energy is licking its lips at the prospect of finding a way to turn algae into biofuel in a financially viable way so they have just invested $25 million to spur that research on.

Algue biofuels have represented a bit of a holy grail to the biofuel industry as it can yield 100 times more biofuel per acre than land-based sources like soy or corn. While this sounds nice, the cost of harvesting and using currently makes algae farming for biofuel cost-prohibitive.

Six of the DOE’s $25 million will go to an Arizona State University team who will be looking at the best ways to use algae biofuels. A University of California, San Diego will get $9 million to work on developing algae strains that are best for biofuel. The remaining money will go to Cellana, LLC and their work on developing large-scale production processes.