If using a high-speed blender, add water, cashews, bell pepper, nutritional yeast flakes, lemon juice, coconut milk, coconut oil, tapioca starch, cornstarch, onion powder, garlic powder, salt, and cayenne pepper.
Process until smooth and creamy.
Mix cold water with agar powder in a saucepan, bring to boil on medium stirring constantly.
Remove from heat and immediately add to cheese sauce.
Process until smooth.
Pour mixture into an oiled container and refrigerate for at least 1 hour.
Alternatively, especially when using a regular blender, process all the ingredients including agar powder in a blender until smooth. Pour sauce into a non-stick sauce on medium heat whisking constantly until thick and bubbly. Immediately pour into an oiled container and refrigerate for an hour.