Of all the renewable energy sources used for power generation, biomass energy has experienced the greatest growth over the last decade. Spurred by requirements established in the Public Utility Regulatory Policies Act of 1978 (PURPA), as well as various tax incentives, biomass-based power generation now provides more than 50 billion kWh of electric energy from 10,000 MW of installed capacity. The overwhelming majority of this capacity, primarily wood-based, has been developed by the nonutility sector. However, the biomass industry is currently facing more difficult market conditions due to a reduction in federal incentives and changes in the generation market, such as lower utility avoided costs, slower demand growth, and greater competition among both generators and fuel sources. States are increasingly contemplating the inclusion of market externalities costs and benefits associated with different generation options in electricity resource planning and procurement decisions. Market externalities, as they relate to generation resources and technologies, represent impacts that are not wholly reflected in the market price of electricity derived from these sources. These impacts, which can be either positive or negative, can encompass environmental, economic and other social factors, but state considerations have focused predominantly on environmental externalities costs, especially air emissions. The explicit quantification of externalities could measurably affect the competitive standing of various energy resources and technologies in future generation resource acquisitions. This paper summarizes work undertaken to assess the status of externalities considerations in state and utility electricity resource planning processes and to determine how externalities considerations might help or hinder future development of biomass power plants.