In the quest for renewable resources, algae are increasingly receiving attention. Their high growth rate, high CO2 fixation and their lack of requirement for fertile soil surface represent several advantages as compared to conventional (energy) crops. Through their ability to store large amounts of oils, they qualify as a source for biodiesel. Algal biomass, however, can also be used as such, namely as a substrate for anaerobic digestion. In the present research, we investigated the use of algae for energy generation in a stand-alone, closed-loop system. The system encompasses an algal growth unit for biomass production, an anaerobic digestion unit to convert the biomass to biogas and a microbial fuel cell to polish the effluent of the digester. Nutrients set free during digestion can accordingly be returned to the algal growth unit for a sustained algal growth. Hence, a system is presented that continuously transforms solar energy into energy-rich biogas and electricity. Algal productivities of 24–30 ton VS ha−1 year−1 were reached, while 0.5 N m3 biogas could be produced kg−1 algal VS. The system described resulted in a power plant with a potential capacity of about 9 kW ha−1 of solar algal panel, with prospects of 23 kW ha−1. Biotechnol. Bioeng. 2009;103: 296–304. © 2009 Wiley Periodicals, Inc.