Shell has announced it is to team up with biofuels specialist HR Biopetroleum to build a pilot facility for growing marine algae that can be turned in biofuel.

The two firms are to form a joint venture company called Cellana to manage the project, which will involve the construction of a demonstration facility in Hawaii capable of assessing different natural microalgae species and determining which produce the highest yields.

Shell said that algae have considerable potential as a source of biofuel because they can "double their mass several times a day and produce at least 15 times more oil per hectare than alternatives such as rape, palm soya or jatropha ".

Advocates of algae-based biofuels also argue that they avoid many of the environmental problems associated with conventional biofuels because the algae can be grown in sea water ponds and not use up agricultural land and fresh water.

"Algae have great potential as a sustainable feedstock for production of diesel-type fuels with a very small CO2 footprint," said Graeme Sweeney, Shell executive vice president of future fuels and CO2. "This demonstration will be an important test of the technology and, critically, of commercial viability."

Environmental concerns about the use of algae for generating biofuels centre on the impact commercially cultivated algae could have on marine ecosystems. But Shell insisted that protection of the marine ecosystem will be central to facility design, adding that it will grow only non-modified, marine microalgae species that are indigenous to Hawaii or approved by the Hawaii Department of Agriculture.

The pilot project will also use bottled carbon dioxide to assess the potential for using algae farms to capture carbon dioxide from industrial facilities.

The announcement comes as Shell is facing criticism for backing away from some of its green technology investments. The company has recently sold its photovoltaic operations in India and Sri Lanka, and according to reports in The Guardian is committed to disposing of similar investments in the Philippines and Indonesia.

Shell said the decision, which follows the sale last year of its solar module production business unit, was prompted by the operations' lack of profitability.

But advocates of solar power accused the oil giant of damaging the embryonic market. Jeremy Leggett, chief executive of Solar Century, told The Guardian that he was disappointed by the move, arguing it ran counter to the company's recent commitments to tackle climate change.

"Shell and Solar Century were among the 150 companies that recently signed up to the hard-hitting Bali Declaration," he said. "It is vital that companies act consistently with the rhetoric in such declarations... This latest evidence of half-heartedness or worse in Shell's renewables activities leaves me… disappointed. Unless fossil fuel energy companies evolve their core activities meaningfully, we are in deep trouble."