The issue is getting the price down to the point that algae based fuels are economical without subsidy. That is attracting a lot of research effort, from private industry as well as government. In principle, production from algae is scaleable to industrial levels, doesn't require prime farmland, and doesn't require clean water. There are lots of places to put it, and the production potential is huge -- provided, again, that the cost can be reduced.
Algae, like ethanol, has the advantage of being compatible with internal combustion and diesel engines and the existing logistical system. (Yes, the engine manufacturers need to shift to conforming materials, but that is easily done. They should just do it.) Biofuels don't require a leap of faith to a whole new technology, such as electrics or hydrogen fuel cells. They can enter the market as additives and fuel extenders, and grow as production expands. Drill, frack, grow ... I don't much care, as long as we put OPEC out of business at reasonable cost, and to do that, I expect that we'll need all three. Ethanol now accounts for 10% of the U.S. gasoline supply by volume, and we're headed toward E15. If algae becomes price competitive, biofuels' market share will grow even more.
Thanks for the reply, sphinx. Very informative. The key is in the economics then, and not so much the technology. Sounds promising.