According to a new report released by Pike Research, algae biofuels production will reach 61 million gallons per year with a corresponding market value of $1.3 billion by 2020. While barely a drop in the bucket for biofuels, this represents a compound annual growth rate (CAGR) of 72 percent, roughly on par with early development in the biodiesel industry. The study, “Algae-Based Biofuels,” examines the key growth drivers behind the algae-based biofuels market and outlines unresolved supply challenges. The report includes detailed 10-year market forecasts, segmented by world region, along with analysis of market conditions in key countries and profiles of key industry players that are shaping the emerging algae biofuels business.

Early research has given preview to algae’s advantages for fuel production including its ability to yield 2 to 20 times more oil per acre than leading oilseed crops. In addition, it doesn’t utilize non food-based feedstock and can grow on non-arable land and in wastewater, including salt water.

“On paper, algae could displace worldwide petroleum use altogether, however, the industry has yet to produce a drop of oil for commercial production,” said Pike Research President Clint Wheelock. “Although the algae-based biofuels market will grow rapidly once key cost hurdles are overcome, widespread scale-up will be hampered by a number of difficult challenges including access to nutrients, water, and private capital.”

Wheelock added that with the cost of production still a key obstacle to widespread production, many companies are refocusing production efforts on low-volume, high-value co-products to develop revenue streams over the next decade.

The report anticipates that the U.S. will lead the way in early production with nearly 50 percent of algae activity happening in the states. Next in line is the European Union, which is home to about 30 percent of algae activity, but their efforts will will initially hampered by the industry’s focus on university research, and later by insufficient access to water, land and nutrient sources. Over time, the report anticipates that Latin America and Asia Pacific will gain significant market share.

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