Due to increasing oil prices and climate change concerns, biofuels have become more important as potential alternative energy sources. It is an open question which kind of biofuels with which yield potentials, characteristic properties and environmental consequences should give the largest contributions. Microalgae offer novel aquatic biomass systems with higher fuel yield potential and lower water demand than terrestrial biomass. They allow the direct generation of desired end products like biooil, hydrogen, or of materials to be processed afterwards (like starch, biomass). Research and development activities at present include fundamentals of algae strain improvement, reactor design and process integration, with auxiliary power requirements and specific reactor cost being addressed as most critical issues.