To many, algae is little more than pond scum, a nuisance to swimmers and a frustration to boaters.

But to a growing community of scientists and investors in Southern California, there is oil locked in all that slimy stuff, and companies are racing to produce an affordable biofuel.

Some companies and research labs have set up shop in the San Diego area, especially an area nicknamed Biotech Beach. There, around 200 biotech companies are clustered on the mesa above Torrey Pines State Beach.

In total, they bring $33 million annually into the local economy, according to the San Diego Association of Governments.

"It's a critical industry, and it's kind of exploded," San Diego Mayor Jerry Sanders said. "... it's going to create a tremendous number of jobs."

National energy companies are converging on the fledgling industry. Exxon Mobil Corp. announced a $600 million partnership with La Jolla biotech company Synthetic Genomics Inc. in July. San Diego companies General Atomics and Science Applications International got nearly $50 million from the Defense Department for algae fuel research.

With its proximity to the ocean and its history with biotech, San Diego is a magnet for clean-energy investors, editor Jim Lane of industry publication Biofuels Digest said.

"It has all the magic conditions for the emergence of business life," he said. "San Diego wants to be associated with algae, while other cities have other fish to fry and think of algae as just one of many things."

The arid Imperial Valley to the east is now home to several massive algae farms, one with nearly 400 acres of ponds.

Skeptics say it's a beachcomber's fantasy, that it's too costly to cultivate any significant amount of algae, that the fuel is too expensive to produce on a large scale.

But, in recent years, San Diego, along with Silicon Valley, St. Louis and Seattle and a few other cities, has emerged as a hotbed of algae biofuel research.

A new research consortium there aims to help commercialize algae biofuels by identifying new algae strains and harvesting methods.

The San Diego Center for Algae Biotechnology was launched in 2008 with 16 founding partners — the University of California-San Diego, Scripps Institution of Oceanography, Salk Institute for Biological Studies, biofuel companies and more.

Until recently, "algae has been this complete backwater of scientific research," said the center's founding director, Steve Kay, dean of biological sciences at UCSD. "But we've all woken up with the realization that we are junking the planet."

Acting as "nature's solar panels," the "amazingly clever little chemical factories" soak up carbon dioxide and sunlight, which is converted into oil through photosynthesis, Kay said.

Algae, he said, can be harvested more often and at greater yields than many other potential biofuel crops such as soybeans or grasses.

Algae also can thrive in difficult environments such as salty or polluted water or in the desert, freeing up valuable agricultural space.

Scientists also envision using algae for livestock feed, antibacterial products, foams for windmill blades or even cancer therapies.

The problem with algae biofuel is translating lab successes to an industrial scale. Mass algae biofuel production could require enormous pools or photobioreactors. Technology still needs to be developed to more systematically extract the oil.

Algae-generated oil currently costs $20 to nearly $33 a gallon to produce, with some estimates soaring to $60. Conventional gasoline costs less than $5 a gallon.

"There's a valley of death between research and development and commercial development," said Lisa Mortenson, chief executive of Community Fuels in Encinitas, Calif.

Kai BioEnergy Corp. can only produce roughly 20 gallons per minute, but needs 300 gallons a minute to be commercially viable. Still, chairman Mario Larach is optimistic.

"It's just a matter of scaling at this point," he said. "If nature can do it, we can do it."