The rapid increase in demand for energy efficiency and sustainability in recent years, the ecofriendly and renewable sources of energy have taken the center stage by replacing the fossil-based energy resources as they associated with serious environmental and health-related issues. These negative factors ignite to rethink and global shift towards a more carbon-neutral source of energy that is biodegradable, sustainable, and ecofriendly. Agro-based materials from crops and post-harvest residues are currently being explored to meet these challenges as primary feedstock for the production of ethanol, agrochemicals, and biodiesel. However, the cultivation of oilseed crops and other cash crops essentially for biodiesel production will avertedly water down on food supply and security and thus we report in this chapter an ideal alternative source of energy derived from microalgae that hold great promise for the future. Cultivation of microalgae will not compete with food productions and fodder demands, can be cultivated anywhere, will not compete with arable land, has simple growth cycle that can produce lipids all year-round under short period of time requiring less water, and has metabolic pathways that establish atmospheric carbon-neutral effect and balance. With this, the aim of the current chapter is to discuss the potentials of microalgae as third-generation energy source, focusing basically on simple taxonomy, lipid biosynthesis, and various cultivation methods. We also reviewed some simple principles used for the optimization of lipid content in microalgae under various lipid-induction techniques and a brief look into the biosequestration characteristics of microalgae. Furthermore, various methods involved in harvesting and extraction of lipid from microalgae and the chemistry for I. B. Bwatanglang et al. 342 the conversion of lipid extracted from microalgae into biodiesel following simple transesterification process are equally touched at the surface in this chapter. Based on the aforementioned, this chapter comes to conclusion elucidating algae lipid metabolism and production as key fundamentals to consider towards achieving the most desired global energy demand that is sustainable and ecofriendly.