Biomass power plants that burn gas or liquid fuels made from biomass qualify for Treasury cash grants for 30% of the project cost, the Treasury said in April.

Cash grants will also be paid on the gasifier, biodigester or other equipment that converts the biomass into fuel. It does not matter that the gasifier, biodigester or other conversion equipment is at a different location than the power plant or even that it is owned by someone else. However, it must be considered an “integral part” of the power plant. Factors that suggest it is an integral part are if both it and the power plant went into service at the same time, the fuel output is dedicated to the power plant and the power plant uses it as the sole source of fuel.

It is not usually considered an integral part if less than 75% of the fuel is dedicated to the power plant.

The latest guidance opens the door to cash grants on cellulosic biofuels plants provided at least 75% of the biofuel is dedicated to a power plant that could qualify for production tax credits.

If only a fraction of the biofuel is dedicated to the power plant, then only that fraction of the biofuel plant qualifies for a grant.

Separate grant applications would be filed where the gasifier, biodigester or other conversion equipment and the power plant are owned by different parties.

The conversion equipment can be built after the power plant. Thus, for example, a grant might be paid on a cellulosic biofuel facility on which construction starts in 2011, provided it is completed by 2013, to supply biofuel to an existing power plant, depending on the facts.

Keith Martin