Three companies -- AMW IBERS, Natural Synergies and AB Systems -- will share the reward to develop technology to turn reeds and other plant material from wetlands into energy.
"The ability to turn plant material, that would otherwise have been burned or left to decompose, into a sustainable energy source is an important part of the move towards a low carbon economy," Energy and Climate Change Minister Barker said in a statement Thursday.
Barker said sources of bioenergy have the potential to account for as much as 11 percent of the British energy mix by 2020.
The plants are already grown for conservation purposes, he said, and new land won't be used nor will the plants used for bioenergy compete with land used for food crops.
The awards are the third in a tranche for biomass that began in October 2012 and runs through March 2015. The three companies awarded the funds will test their programs at three separate wetland sites.