One of the criticisms that algal biofuel efforts have suffered is that the technology requires more development-- more pilot projects. The new partnership between startup Algenol Biofuels and the giant Dow Chemical to build a demonstration algal biofuel plant could bring the promise one step closer to reality.

The $50 million plant will be producing ethanol fuel, but Dow has greater aims. The company is planning on algae-based ethanol to replace natural gas as an ingredient in plastics as well as using it as an avenue towards clean coal and cleaning up.

Dow will be supporting the company with expertise in water and land management. The chemical company is also working on researching advanced materials and films for the photo-bioreactor system that will house the algae.

The algae-to-ethanol process also produces oxygen, which could be used to burn coal cleanly. The pilot project is planned to have 3,100 bioreactors—Algenol currently has 40 operating in Florida.

A number of other collaborators are working on Algenol's project— Renewable Energy Laboratory, the Georgia Institute of Technology and Membrane Technology & Research will be working on the plant that is expected to 'ingest' two tons of carbon dioxide a day. Dow has plans to use algae as biomass that potentially could soak up coal plant exhaust.

The pilot plant will be installed in Freeport, Texas in a 24-acre location near to a manufacturing facility with emissions that will feed the blue-green algae. The Florida-based algae startup has said that the target price is $1 a gallon for the bioreactor-grown fuel.

With the possibility of cap and trade, companies will be forced to consider carbon reduction options— potentially algae could prove an attractive alternative to offsets. Biofuels have also have a significant potential funding source via stimulus funds from DOE grants.