Beat butter at medium speed of an electric mixer until creamy; gradually add 1 cup sugar, beating well. Add egg and vanilla, beating until blended.
Combine flour, baking powder, and salt; add to butter mixture, beating well. Stir in hazelnuts. Divide dough in half; shape into 11" logs.
Combine 1/4 cup sugar and coffee granules; stir well. Roll each log in sugar mixture, coating heavily. Wrap each log in wax paper. Chill logs until firm.
Cut dough into 1/4" thick slices, and place on ungreased cookie sheets. Bake at 350° for 8 to 10 minutes or until lightly browned. Remove to wire racks, and cool completely. Store in an airtight container up to 1 week.