As stated in the FOA: ““Algal Biomass” means biomass from cyanobacteria, microalgae, and macroalgae. Algal biomass from heterotrophic algae must be grown using a high-impact biomass-derived feedstock to qualify.” Also note that while aquatic plants may be lignocellulosic feedstocks, they may not be high-impact biomass-derived feedstocks as defined in the FOA.
Applicants may choose to use algae in the two different ways that would be responsive to this FOA.
1) "This Funding Opportunity Announcement (FOA) is intended for research and development (R&D)...that will accelerate the development of thermochemical liquefaction technologies to produce a bio-oil feedstock from biomass considered to be a high-impact feedstock or from algal biomass...The bio-oil feedstock produced must be utilized within a petroleum refinery and leverage its existing capital for further processing to final fuels (such as renewable: gasoline, diesel, jet fuel) that will contribute to the Energy Independence and Security Act of 2007, Renewable Fuels Standard volumetric goals for advanced biofuels."
2) "Projects may also propose technologies utilizing oils extracted from algae that could be accepted into a petroleum refinery for further processing to the final products...Heterotrophic algae will be considered only if grown using a high-impact cellulosic biomass-derived feedstock so that the final fuel will be an advanced biofuel. Tasks related to the development of algal strains, cultivation, growing, and harvesting are specifically excluded from this FOA and applications proposing such efforts will be deemed non-responsive and excluded from further consideration."
Therefore, to be responsive to the FOA, your feedstock must meet the definition of algal biomass or high impact feedstock.