Biofuels are considered a key element in meeting the growing energy demand in the transportation sector while contributing to climate change mitigation. However, the challenge resides in obtaining an economically viable substitute for fossil fuels that does not compete with food production. Third-generation biofuels, which use microalgae as the main feedstock and are characterized by their high oil yield, appear to be a promising alternative to overcome the drawbacks of first and second-generation biofuels. Although algae biofuels have been proved to be feasible, their future economic viability is associated with considerable uncertainty. Given the absence of dominant designs in many of the core technological components as well as the limited amount of data available from field applications, previous studies on biofuels from algae are based on diverging assumptions and, consequently, deliver results which may vary by more than an order of magnitude. Therefore, the current viability of algae biofuel and its possible drivers remain unclear. Hence, this thesis tries to enhance the understanding of current state and future prospects of algae biofuels. It also serves as decision-making support for practitioners in the area of third generation biofuels. To this end, a combination of quantitative and qualitative methods is employed. An extensive literature review and in-depth interviews with stakeholders from different parts of algae biofuels value chain are complemented by a simplified techno-economic model to determine the levelized cost of algae biofuels (LCOBF) cultivated in photobioreactors. A sensitivity analysis identifies cultivation technology, capital investment, and algae strain selection as the main cost drivers. With a current LCOBF of 23.62 EUR/l, algae biofuels are not likely to be commercially feasible until improvements in both technology and microbiology are reached. This is in line with experts’ impressions, who claim that algae biofuels might be economically viable in 10 years. To discuss the prospects of the technological development and feed-back our results to our interviewees, three hypothetical scenarios are derived and analysed. The thesis concludes with a discussion of the main findings and implications for managers and policy-makers. The outcomes of this thesis provide guidance for decision makers to reduce the uncertainty regarding the current state of algae biofuels and the required areas of investigation, thus stimulating progress of third-generation biofuels.

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