That said, I'm a big fan of algae farming. It seems like such a blatant 'duh' that it will seriously begin to take off - it makes complete sense. Take waste, take excess CO2 and then some, return the most efficient and abundant food and fuel source known.
You would think.
However, I would urge caution in evaluating the claims of the algaculturalists.
In order to be a viable substitute for crude oil, the end result of algaculture must:
1) be burnable in existing fossil-fuel fired engines with little or no modification. The reason for this is we haven't the time or resources to build a whole new generation of internal combustion engine to run on a special new fuel. We're going into the oil crash with substantially the infrastructure we have today. From what I understand, the initial results of this are promising...but unconfirmed. Then there's also the matter of whether existing storage and transportation infrastructure can be used.
2) The oil substitute must also fulfill the numerous non-energy uses of crude oil: plastics, petrochemicals, fertilizers, pharma, etc. I haven't read anything on whether algaculture does this or not.
3) The end product of algaculture must have an EROEI (Energy Returned On Energy Invested) of at least 5 to 1, preferably 10 to 1 or better. This has been the hobgoblin of oil alternatives thus far. Crude oil has an EROEI of between 10 to 1 to as high as 25 to 1 (used to be nearly 100:1 early in the 20th century when it was so abundant and cheap to access). What this means is that, if you have a quantity of refined algae that, when burned, yields a kilojoule of energy, it isn't of much use if you had to invest 600 joules to obtain it. You're coming out a little ahead, but not far enough ahead to have an abundant, profitable source of energy. This is where tar sands, oil shale, and ethanol all fall short: you have to put in almost as much energy into obtaining the oil or ethanol as you get from burning it.
If you invest a joule of energy in the manufacture and refining of algae into fuel, you need to be getting at least five joules of energy for that joule you invested when you burn the final product. (Because sunlight is free, I'll exempt solar input from the calculation.) I haven't read anything on what the EROEI for algae-derived fuels is.
4. The fuel must be producible on a mass scale (current oil production is 35 million barrels per day) without crowding out the production of other essential products. This is another criteria by which ethanol earned a big fat FAIL, as to scale ethanol production up to anything near what we would need for a true oil substitute would mean mass starvation as farmland was used to grow fuel.
So, the true test of algaculture will be whether it meets those four conditions.