To date, researchers have expressed increasing interest in the potential of using microalgae as a biofuel feedstock and technological solution for CO2 sequestration. Microalgae‐derived biodiesel production is one of the best choices for biofuels production, since microalgae have substantial amounts of lipids which can be used for biodiesel conversion. Nonetheless, after the production of algal biodiesel, large quantities of residuals or post‐extracts are left over, threatening environmental hygiene if not disposed of appropriately. In this respect, it is critical that the utilization of these remnants is taken into account in an effort to make microalgal biodiesel sustainable. This paper evaluates the theoretical biodiesel, ethanol, and methane yields and the relative calorific values in the production chain of algal biofuels. It is found that fermentation and anaerobic digestion of microalgae residuals are two steps which could assist in dealing with the problem of algal waste, as well as the economic and energetic balance of such a promising technology. It also discusses in detail the potential of the continuous conversion of algal residuals into ethanol and methane, with particular focus on the energetic interest, and nitrogen and phosphorus recycling. Key technical issues related to fermentation and anaerobic digestion are indentified, the strategies to improve their production highlighted, and the necessity of producing algal biodiesel and/or ethanol discussed. © 2013 Society of Chemical Industry and John Wiley & Sons, Ltd