Unlocking algae's potential for biofuel

To many, algae is little more than pond scum, a nuisance to swimmers and boaters.

But to a growing community of scientists and investors, there is oil locked in all that slimy stuff, and companies are racing to try to figure how best to unleash it and produce an affordable biofuel.

The companies have set up shop in the San Diego area -- around 200 biotech companies are clustered on a mesa above Torrey Pines State Beach.

Together, the companies and organizations conducting algae research employ nearly 300 people with more than $16 million in payroll and bring $33 million annually into the local economy, according to the San Diego Association of Governments.

"It's a critical industry, and it's kind of exploded," San Diego Mayor Jerry Sanders said. "There's a long pattern of huge companies being spawned ... and it's going to create a tremendous number of jobs."

National energy companies are converging on the fledgling industry. Exxon Mobil Corp. announced a $600 million partnership with La Jolla biotech company Synthetic Genomics Inc. in July. San Diego companies General Atomics and Science Applications International Corp. have received nearly $50 million from the Defense Department for research.

Last year, $176 million was invested by venture capitalists to develop biofuel from algae, according to industry publication Biofuels Digest in Miami.

Supplementing the research is experimental aquaculture, as farming in fresh and salt water is known. The arid Imperial Valley to the east is now home to several massive algae farms, one with nearly 400 acres of ponds.

All this activity has drawn its share of doubters. Skeptics say that it's a beachcomber's fantasy, that it's too costly to cultivate any significant amount of algae, that fuel inside -- whether in the form of oil, ethanol, gas or hydrogen -- is too expensive to extract or produce on a large scale.

But in recent years, San Diego, Silicon Valley, St. Louis and Seattle and a few other cities have disregarded the skeptics and emerged as hotbeds of algae biofuel research.