Rapidly depleting stocks of fossil fuels and increasing greenhouse gas (GHG) emissions have necessitated the exploration of cost effective sustainable energy sources focussing on biofuels through algae. Abundant wastewaters generated in urban localities every day provide the nourishment to nurture algae for biofuel generation. The present communication focuses on the lipid prospects of algae grown in wastewater systems. Euglena sp., Spirogyra sp. and Phormidium sp. were collected from selected locations of sewage fed urban lakes and sewage treatment plants of Bangalore and Mysore. The total lipid content of Euglena sp. was higher (24.6%) compared to Spirogyra sp. (18.4%) followed by Phormidium sp. (8.8%) and their annual lipid yield potential was 6.52, 1.94 and 2.856 t/ha/year, respectively. These species showed higher content of fatty acids (palmitate, stearate followed by oleic and linoleic acids) with the desirable biofuel properties. (C) 2013 Elsevier Ltd. All rights reserved.