Following scrutiny of present biofuels, algae are seriously considered as feedstocks for next-generation biofuels production. Their high productivity and the associated high lipid yields make them attractive options. In this review, we analyse a number aspects of large-scale lipid and overall algal biomass production from a biochemical and energetic standpoint. We illustrate that the maximum conversion efficiency of total solar energy into primary photosynthetic organic products falls in the region of 10%. Biomass biochemical composition further conditions this yield: 30 and 50% of the primary product mass is lost on producing cell protein and lipid. Obtained yields are one third to one tenth of the theoretical ones. Wasted energy from captured photons is a major loss term and a major challenge in maximising mass algal production. Using irradiance data and kinetic parameters derived from reported field studies, we produce a simple model of algal biomass production and its variation with latitude and lipid content. An economic analysis of algal biomass production considers a number of scenarios and the effect of changing individual parameters. Our main conclusions are that: (i) the biochemical composition of the biomass influences the economics, in particular, increased lipid content reduces other valuable compounds in the biomass; (ii) the “biofuel only” option is unlikely to be economically viable; and (iii) among the hardest problems in assessing the economics are the cost of the CO2 supply and uncertain nature of downstream processing. We conclude by considering the pressing research and development needs.