Since the 1930ís, many states and the federal government have provided various incentives designed to stimulate the production and use of fuel ethanol. Incentives have ranged from grant and finance programs for ethanol production facilities to at-the-pump incentives designed to encourage the sale of ethanol blended gasoline. As project developers evaluate the impact of incentives on the proposed project, it is important to understand the net value of incentives and the benchmarks that must be met to qualify for specific incentives.
Value of Incentives: Ethanol incentives have historically been of two types:
- Incentives designed to stimulate the use of ethanol.
- Incentives designed to stimulate the production of ethanol.
The most valuable ethanol incentives are generally production credits or payments. Such incentives have periodically been available from the federal government. Several states also provide some form of ethanol production incentive. Ethanol project developers should review applicable federal, state and local business incentives that may have an economic impact on the project. Such incentives may also be a consideration during the site selection process. Project developers can often obtain detailed information about general business incentives from state and local economic development authorities. These same sources should be aware of incentives that may be applicable to the production of ethanol specifically or to biomass derived products generally. Project developers should develop a value estimate of incentives that may be available to the facility.
An Overview of Incentive Programs
Tax incentives can play an important role in the profitability of ethanol plants and other biofuel projects. Project financiers will also expect an analysis of incentives for which a proposed facility may be eligible. Following is a general overview of incentives that may be available to an ethanol plant depending on eligibility requirements of the various programs.