Global Biomass Fuel Market Outlook, 2031

The global biomass fuel market is a foundational pillar of the renewable energy industry, supplying the wood pellets, wood chips, agricultural residues, and other organic materials that power renewable electricity generation, industrial heating, and residential heating applications worldwide. Global wood pellet production reached 53.5 million tonnes in 2025, a 10% increase compared with 2024 and the strongest year-on-year growth recorded in recent years, according to Bioenergy Europe's latest Pellet Statistical Report. Global pellet consumption also reached a new all-time high of 51.5 million tonnes, confirming the continued relevance of pellets across both industrial applications and small-scale heating. The EU is the world's largest wood pellet market, consuming 22.7 million metric tons of pellets in 2025, with consumption forecast to increase by another 500,000 MT in 2026 based on a further expansion of residential use. The United Kingdom remains the largest global consumer of imported wood pellets, with imports forecast to exceed 9.6 million metric tons in 2025, a growth of three percent over 2024 figures. The biomass fuel market is dominated by companies including Enviva Inc., Drax Global, CM Biomass, Iwatani Corporation, and Hanwa Co., Ltd., alongside palm kernel shell specialists including NISSIN BIO ENERGY, DSNG, and BIO ENECO. The market's evolution is driven by renewable energy targets, industrial decarbonization mandates, and the growing recognition of biomass as a dispatchable renewable fuel that can replace coal in power generation and industrial processes.

The global development of biomass fuels exhibits significant regional imbalances, with Europe representing the largest and most mature market, accounting for 70% of global demand when industrial and small-scale uses are combined and 45% of world production. European small-scale pellet consumption reached more than 19 million tonnes in 2025, a new historical record, with residential consumption alone rising to 15.3 million tonnes, increasing by 5% compared with 2024. Across Europe, pellet appliances now provide renewable heating to more than 6.5 million households. The Asia-Pacific region is emerging as the fastest-growing market, driven by coal-to-biomass conversions in Japan, South Korea, and China. North America remains a significant producer and consumer, with the United States representing a major market for wood pellets and agricultural residues. The market is witnessing a transition from traditional biomass combustion to advanced conversion technologies, with gasification, anaerobic digestion, and torrefaction enabling higher-value products including sustainable aviation fuel and renewable hydrogen. Key obstacles include high capital expenditure for biomass plants, feedstock competition with panelboard and pulp industries, and sustainability scrutiny from NGOs and financiers regarding land use and carbon accounting.

Market Dynamics

Market Drivers • Coal Phase-Out and Biomass Co-Firing: The most powerful driver across the global biomass fuel market is the phase-out of coal-fired power generation, with biomass pellets increasingly used as a co-firing fuel or complete replacement for coal in converted power plants. Power firms are pushing co-firing blends from 10% toward full fuel substitution, avoiding stranded-asset risks, and Babcock & Wilcox retrofitted a Michigan plant to run on woody biomass with integrated carbon capture, targeting net-negative 550,000 tCO₂ annually. Steam-explosion pretreatment boosts calorific value, letting pulverized units burn biomass without extensive mill upgrades. The upfront engineering costs favor incumbent utilities that own fuel-handling systems, widening the moat against smaller entrants.
• Industrial Decarbonization and Renewable Energy Targets: Industrial sectors including cement, steel, chemicals, and paper are increasingly adopting biomass fuels to reduce carbon emissions from high-temperature process heat. The European Union's revised Renewable Energy Directive (RED III), targeting 42.5% renewable energy share by 2030, is significantly boosting demand, specifically classifying biomass as a renewable energy source and mandating its use. Member states must reach 42.5% renewable energy in final consumption by 2030, and heating is the fastest lever to pull, with Austria logging 19,181 new pellet-boiler installations during early 2024, with subsidies meeting 75% of capital cost, up to EUR 18,000 per unit. Germany mirrors this policy, offering up to 70% subsidy coverage.

Market Challenges • Feedstock Competition and Supply Chain Constraints: Limited feedstock availability and inconsistent supply chains pose significant challenges. Biomass resources such as agricultural waste and wood residues are seasonal and region-specific, and in many developing regions, the absence of organized collection and transport systems increases procurement costs and material degradation risks. Panelboard mills offer premium pricing for fine sawdust, diverting up to 15% of residue that would otherwise feed pellet lines. Kraft pulp plants upgrading into biorefineries extract lignin, ethanol, and green chemicals, enabling higher margins than commodity energy pellets, creating competition for feedstock.
• High Capital Costs and Sustainability Scrutiny: Despite strong demand, high capital expenditure and operational expenditure restrain market growth, as biomass plants require costly infrastructure, including boilers, gasifiers, and feedstock handling units. Feedstock transportation and storage add further costs due to biomass's low energy density and bulky nature, and solar and wind energy offer lower operating costs and faster scalability, making biomass comparatively less attractive in certain regions without strong subsidies. Sustainability and land-use scrutiny by NGOs and financiers, along with the EU Deforestation-free Supply Chain Regulation (EUDR) targeting wood pellets and wood chips, could become a trade barrier.



Market Trends • Advanced Conversion Technologies and Torrefied Pellets: The market is witnessing a shift toward advanced conversion technologies, with gasification, pyrolysis, and anaerobic digestion enabling higher-value products including sustainable aviation fuel and renewable hydrogen. Torrefied and black pellets will post a 21.4% CAGR to 2030, with steam-explosion densification raising durability and reducing freight expenditure by 30%, spurring uptake among utilities that need coal-substitute grindability. Small-scale combined heat and power generation from gasification is a mature and well-established technology, with over seventeen hundred operational units, and the focus is now shifting to higher-value products like Sustainable Aviation Fuel (SAF) and renewable hydrogen.
• Industrial Coal-to-Biomass Conversions and Waste-to-Energy: The expansion of industrial coal-to-biomass conversions is a defining trend, with power firms pushing co-firing blends from 10% toward full fuel substitution. Hanwha Energy's planned combined-heat-and-power switch in South Korea underlines broader Asian uptake. Waste-to-energy initiatives present significant opportunities, as according to the U.S. Energy Information Administration, 85 pounds out of every 100 pounds of municipal solid waste in the U.S. can be burned to generate electricity, and waste-to-energy facilities reduce waste volume by approximately 87%, converting 2,000 pounds of waste into 300-600 pounds of ash.

Segmentation Analysis

Wood pellets dominate the biomass fuel market by fuel type because they are the most widely traded and standardized biomass fuel, used extensively in power generation and residential heating.
• Wood pellets dominate the market, holding major market share in 2026, and are widely used in residential heating, industrial heating, and power generation, with Europe, Japan, and South Korea providing subsidies and renewable incentives supporting wood pellet adoption.
• Wood pellets are produced from compressed sawdust and wood waste, offering high energy density and consistent quality that enables efficient combustion, with the EU alone consuming 22.7 million metric tons of pellets in 2025.
• Palm kernel shell (PKS) is projected to grow through the forecast period, as a cost-effective byproduct of palm oil production in Malaysia, Indonesia, and Thailand.
• The wood pellet segment commanded a dominant share in 2024 within the biomass solid fuel market, while torrefied and black pellets will show rapid growth.
• Wood chips are lower-cost than pellets but have lower energy density, making them suitable for local or regional use, while agricultural residues including straw, rice husks, and palm kernel shells are increasingly used in biomass power plants.
• The fuel type segment benefits from the growing demand for renewable heating and power generation, with residential consumption alone rising to 15.3 million tonnes in Europe, increasing by 5% compared with 2024.
• Key players in the fuel type segment include Enviva Inc., Drax Global, CM Biomass, Iwatani Corporation, and Hanwa Co., Ltd., alongside palm kernel shell specialists including NISSIN BIO ENERGY, DSNG, and BIO ENECO.

Power generation dominates the biomass fuel market by application because it represents the largest and most economically significant use of biomass fuels, with utilities seeking to replace coal in existing power plants.
• In power generation, bioenergy produced 711 TWh in 2024, representing 7 percent of global renewable electricity. The application segment benefits from the growing demand for baseload renewable power and the increasing adoption of coal-to-biomass conversions.
• Key trends in the power generation segment include the expansion of industrial coal-to-biomass conversions, with power firms pushing co-firing blends from 10% toward full fuel substitution, avoiding stranded-asset risks. Steam-explosion pretreatment boosts calorific value, letting pulverized units burn biomass without extensive mill upgrades.
• The power generation segment benefits from the growing adoption of biomass energy with carbon capture and storage (BECCS), which enables renewable power generation while supporting carbon removal goals.
• Industrial heating is a significant and growing application segment, with industries such as cement, steel, chemicals, and paper shifting toward biomass fuel to reduce emissions.
• Residential and commercial heating represents a major application segment, with European small-scale pellet consumption reaching more than 19 million tonnes in 2025 and residential consumption alone rising to 15.3 million tonnes, with pellet appliances now providing renewable heating to more than 6.5 million households across Europe.
• The transportation segment is witnessing increased adoption of bioethanol, biodiesel, and sustainable aviation fuel, with the EU's Green Deal promoting carbon-neutral transport policies and Annex IX quotas supporting biomass-based fuels.

Utilities dominate the biomass fuel market by end user because they represent the largest consumers of biomass fuels for power generation, driven by coal phase-out mandates and renewable portfolio standards.
• Utilities account for the largest share of biomass fuel consumption, driven by coal phase-out mandates and renewable portfolio standards, with power firms pushing co-firing blends from 10% toward full fuel substitution. Utilities are favoring long-term offtake deals to lock in certified volumes at predictable prices.
• The industrial end-user segment is a significant and growing category, with industries such as cement, steel, chemicals, and paper shifting toward biomass fuel to reduce emissions. The industrial segment benefits from the growing adoption of biomass for high-temperature process heat.
• The commercial end-user segment includes businesses such as hotels, hospitals, and office buildings that use biomass fuels for heating, with the segment benefiting from the growing adoption of renewable heating solutions in the commercial sector.
• The residential end-user segment represents a major market for biomass fuels, particularly in Europe, where pellet appliances now provide renewable heating to more than 6.5 million households. Italy and France have the largest installed stocks of pellet appliances, with more than 2.3 million and 2 million units in operation respectively.

Combustion dominates the biomass fuel market by technology because it is the most mature, widely deployed, and cost-effective method for converting biomass into usable energy.
• Direct combustion leads the segment with 56.29% market share in 2026, with technologies such as stoker boilers and fluidized bed boilers making this method widely adopted for power generation and industrial heating.
• Combustion is the most mature and widely deployed biomass conversion technology, with applications ranging from residential pellet stoves to large-scale utility boilers. The technology benefits from established supply chains for biomass fuels and combustion equipment.
• Gasification is a growing technology segment, with small-scale combined heat and power generation from gasification being a mature and well-established technology, with over seventeen hundred operational units. The focus is now shifting to higher-value products like Sustainable Aviation Fuel (SAF) and renewable hydrogen.
• Anaerobic digestion is a significant technology segment, particularly for converting wet biomass feedstocks such as animal waste and sewage sludge into biogas, which can be upgraded to biomethane for grid injection or vehicle fuel.
• Other technologies, including pyrolysis and torrefaction, represent emerging segments, as steam-explosion densification raises durability and reduces freight expenditure by 30%.

Regional Analysis

Europe is the largest region globally because it represents 70% of global biomass fuel demand when industrial and small-scale uses are combined, and accounts for 45% of world production.
• Europe remains the world's largest pellet-consuming region, representing 70% of global demand when industrial and small-scale uses are combined, and continues to lead global production, accounting for 45% of world output. European pellet production, excluding Belarus and Russia, increased by 10% to 24.1 million tonnes, setting a new regional record.
• The EU is the world's largest wood pellet market and consumed 22.7 million metric tons of pellets in 2025, with consumption forecast to increase by another 500,000 MT in 2026 based on a further expansion of residential use.
• European small-scale pellet consumption reached more than 19 million tonnes in 2025, a new historical record, with residential consumption alone rising to 15.3 million tonnes, increasing by 5% compared with 2024.
• Across Europe, pellet appliances now provide renewable heating to more than 6.5 million households, with Italy and France having the largest installed stocks, with more than 2.3 million and 2 million units in operation respectively.
• Member states must reach 42.5% renewable energy in final consumption by 2030, and heating is the fastest lever to pull, with Austria logging 19,181 new pellet-boiler installations during early 2024, with subsidies meeting 75% of capital cost.

Key development

• March 2026: Octopus Energy backed a billion-dollar biomass-to-SAF project in Nova Scotia, with Nova Sustainable Fuels receiving environmental approval from the Nova Scotia government in December 2025, subject to 34 conditions covering environmental protection and human health.
• January 2026: EU regulations introduced on 1 January 2025 require all aviation fuel supplied at EU airports to contain a minimum of 2% SAF, rising to 6% by 2030, driving significant demand for biomass-based sustainable aviation fuel.


Considered in this report
Historic Year: 2020
Base year: 2025
Estimated year: 2026
Forecast year: 2031

Aspects covered in this report
Biomass Fuel Market with its value and forecast along with its segments
Various drivers and challenges
On-going trends and developments
Top profiled companies
Strategic recommendation

By Fuel Type
• Wood Pellets
• Wood Chips
• Agricultural Residues
• Animal Waste
• Municipal & Industrial Biomass Residues
• Other Biomass Fuels

By Application
• Power Generation
• Industrial Heating
• Residential & Commercial Heating
• Transportation

By End User
• Residential
• Commercial
• Industrial
• Utilities

By Technology
• Combustion
• Gasification
• Anaerobic Digestion
• Others