Algae fuel being sold for the first time to regular drivers

In what appears to be the first time ever, regular drivers of diesel-powered cars, will be able to fill up their tanks with an algae diesel fuel blend in a few Northern California cities, including Oakland, Berkeley, Redwood City and San Jose. In a collaboration announced on Tuesday, alternative gas station company Propel Fuels says it will offer the algae fuel blend made by Solazyme (s SZYM) in a month-long pilot program.

Algae fuel has long been discussed as a viable biofuel alternative to gas and diesel, but until now no companies have been making it in bulk and selling it to regular car drivers. The month-long program is meant to test consumers’ responses to the alternative fuel, and the algae fuel will be sold at the same price as diesel at these locations. Algae fuel is generally currently more expensive than diesel.

The so-called Soladiesel uses a 20 percent blend of the algae oil, and can deliver a 20 percent reduction in carbon emissions, a 30 percent reduction in particulates, and a 10 percent reduction in THC.

After nine-years, an IPO and $125 million in venture funding, Solazyme finally broke into biofuels in a more commercial way this Summer by beginning construction on a biofuel plant in Brazil through a joint venture with Bunge. The plant is supposed to be operational in the fourth quarter of 2013, but Solazyme has been producing it on a smaller scale for awhile.

Solazyme engineers efficient algal strains and grows its designer algae in fermentation tanks without sunlight by feeding it sugar. Then, using existing industrial equipment, it extracts the oil. Solazyme has long maintained that it has wanted to commercialize its fuel technology in the 2013 time frame, with a production cost target of $60 to $80 per barrel. Seems like it’s getting there.