In the pursuit of sustainable solutions for contemporary environmental challenges arising from the increasing global demand for energy, this study delves into the potential of cyanobacteria, specifically Arthrospira platensis (commonly known as “spirulina”), as a versatile resource. Employing a life cycle assessment (LCA) in accordance with the ISO 14044:2006 standard and employing both midpoint and endpoint indicators, the study comprehensively evaluates environmental impacts. The research explored a range of scenarios, specifically investigating variations in light intensity and harvesting volume. These investigations were carried out using a pilot-scale photobioreactor, specifically an airlift reactor system featuring a horizontal tubular downcomer. The primary focus is on extracting valuable compounds, namely exopolysaccharides and phycocyanin. It emphasized the extraction of value-added products and strategic integration with a biogas plant for process heat, contributing to developing a sustainable supply network and offering insights into environmentally conscious algae cultivation practices with implications for renewable energy and the production of valuable products. The results emphasize the project’s potential economic feasibility with minimal energy impact from by-product extraction. The environmental assessment identifies marine ecotoxicity and fossil resource depletion as principal impacts, predominantly influenced by upstreaming and harvesting stages. After conducting comparisons across various scenarios, it was found that cultivations under higher light intensities have a lower environmental impact than cultivations with low light supply. However, regardless of light intensity, processes with shorter harvesting cycles tend to have a smaller environmental impact compared to processes with longer harvesting cycles. Overall, this research contributes a nuanced and realistic perspective, fostering informed decision-making in sustainable algae cultivation practices, with implications for renewable energy and valuable compound production.