Biomass Fuel (Wood Pellets and Palm Kernel Shell (PKS)) Market Outlook 2026-2034: Market Share, and Growth Analysis By Combustion Method (Direct Combustion, Gasification, Pyrolysis, Others), By Feedstock (Wood Pellets, Palm Kernel Shell (PKS), Others), By

Biomass Fuel (Wood Pellets and Palm Kernel Shell (PKS)) Market is valued at US$22.1 billion in 2025 and is projected to grow at a CAGR of 7.1% to reach US$40.97 billion by 2034.

Biomass Fuel (Wood Pellets and Palm Kernel Shell (PKS)) Market – Executive Summary

The biomass fuel (wood pellets and palm kernel shell (PKS)) market has become a central pillar in the global transition from fossil-based energy to low-carbon heat and power, leveraging sustainably sourced solid biomass to decarbonize utility, industrial, and commercial energy systems. Wood pellets, produced from sawmill residues, forest by-products, and agricultural biomass, offer high energy density, standardized quality, and compatibility with modern boilers and converted coal units, while PKS provides an attractive, low-cost fuel derived from the palm oil industry, particularly in Asia. Key applications span utility-scale co-firing and dedicated biomass power plants, industrial boilers in cement, steel, pulp and paper, and chemicals, district heating networks, commercial and institutional heating, and small-scale residential stoves and boilers in colder regions. Recent trends include expansion of long-term offtake contracts between pellet producers and power utilities, rapid growth of PKS utilization in Asian industrial clusters, and increasing interest in torrefied and advanced pellets that mimic coal handling characteristics. Market growth is driven by renewable energy and climate targets, carbon pricing, air quality concerns, and corporate net-zero commitments that push heavy industry and utilities to replace coal in existing assets rather than abandon them prematurely. At the same time, the sector faces intensifying scrutiny around sustainability of forestry practices and palm oil supply chains, prompting wider adoption of certification schemes, chain-of-custody systems, and independent audits. The competitive landscape is characterized by integrated pellet producers, forestry and agro-industrial conglomerates, PKS aggregators and exporters, biomass trading houses, boiler and power technology OEMs, and utilities securing diversified biomass portfolios. Overall, the biomass fuel (wood pellets and PKS) market is evolving from an opportunistic waste-to-fuel outlet into a structured, internationally traded commodity space where sustainability credentials, long-term reliability, and sophisticated logistics are as important as calorific value and price.

Key Insights:

Decarbonization of power and heat as the core growth engine: Biomass fuels, particularly wood pellets and PKS, are increasingly used to displace coal in power stations and industrial boilers, allowing operators to cut direct emissions without fully rebuilding assets. This makes biomass a pragmatic pathway for utilities and heavy industry aiming to comply with climate policies and investor expectations while maintaining baseload and process reliability. The ability to retrofit existing combustion systems with limited structural changes keeps biomass central to near- and mid-term decarbonization strategies.

Wood pellets as the leading traded solid biomass commodity: Standardized pellet specifications, high bulk energy density, and good flow properties have made wood pellets the backbone of cross-border biomass fuel trade. Large volumes move from forested regions with surplus residues to energy-importing markets for utility-scale power and district heating, complemented by smaller volumes for residential and commercial heating. This established value chain supports sophisticated contracting, hedging, and logistics models that increasingly resemble those in conventional energy commodities.

PKS emerging as a cost-effective industrial and power fuel: Palm kernel shell is gaining prominence as an affordable biomass fuel in regions with strong palm oil industries, particularly for cement kilns, industrial boilers, and biomass power plants. As a by-product, PKS offers attractive economics and supports circular use of agro-industrial residues, strengthening sustainability narratives for both energy users and palm oil producers. Growing export flows from producing countries to Asian power and industrial markets are formalizing PKS as a distinct traded fuel segment.

Policy frameworks and sustainability criteria strongly shape demand: Renewable energy targets, carbon reduction mandates, and incentives for low-carbon heat and power underpin long-term demand for biomass fuels. At the same time, evolving sustainability rules around land use, forest management, and palm oil production are tightening acceptable feedstock criteria. Projects increasingly depend on credible certification, traceability, and lifecycle greenhouse gas assessments, making regulatory alignment and demonstrable sustainability performance critical competitive differentiators.

Scrutiny on environmental and social impacts intensifies: Concerns regarding deforestation, biodiversity loss, and competition with other land uses are prompting deeper assessment of biomass sourcing practices, particularly for woody feedstocks and palm-based residues. Stakeholders are demanding evidence that biomass fuels deliver meaningful emissions reductions compared to coal and do not drive unsustainable land conversion. This pressure is pushing the market toward higher transparency, robust third-party verification, and preference for residues and by-products rather than primary forest biomass.

Technology innovation enhances fuel quality and system compatibility: Advances in pelletizing, drying, torrefaction, and quality control are improving energy density, grindability, and storage stability of biomass fuels. These improvements reduce handling issues, lower transport costs per unit of energy, and make co-firing or conversion of coal units technically simpler and more reliable. Boiler and combustion system upgrades, including improved feeding systems and emissions controls, further expand the range of plants that can efficiently utilize wood pellets and PKS at higher substitution rates.

Diversification of feedstock and supply geographies mitigates risk: To reduce exposure to regional weather events, policy shifts, and logistics disruptions, utilities and traders are diversifying their biomass portfolios across multiple pellet origins and PKS suppliers. This diversification extends to feedstock mixes, combining forestry residues, sawmill by-products, and agricultural wastes to stabilize availability and pricing. Such strategies require sophisticated supply chain management but enhance resilience and support long-term contract performance.

Industrial process heat and combined heat and power as key end-use segments: Beyond large power stations, a growing share of biomass fuel demand comes from industrial boilers and combined heat and power units in sectors such as cement, steel, paper, and chemicals. These applications leverage biomass to decarbonize high-temperature and continuous heat requirements that are harder to electrify cost-effectively. Wood pellets and PKS provide relatively straightforward drop-in solutions for existing boiler infrastructure, making them attractive options for progressive industrial decarbonization roadmaps.

Logistics, storage, and handling infrastructure as competitive levers: Efficient port terminals, storage silos, rail and barge connections, and specialized handling equipment significantly influence delivered fuel costs and reliability. Market players that invest in integrated logistics chains and optimized storage solutions can offer more stable supply and tighter quality control. Over time, clusters of biomass logistics hubs near industrial and power demand centers create regional ecosystems that reinforce fuel choice and support new project development.

Long-term role shaped by energy transition pathways and BECCS potential: The future trajectory of biomass fuel demand will depend on how quickly electrification, green hydrogen, and other low-carbon options scale, as well as on societal acceptance of large-scale bioenergy. In many transition scenarios, wood pellets and PKS are expected to retain an important role in hard-to-abate sectors and legacy coal assets, particularly when coupled with carbon capture to deliver negative emissions. Success will hinge on demonstrating robust sustainability, maintaining competitive costs, and integrating biomass within broader, region-specific decarbonization strategies.

Biomass Fuel (Wood Pellets and Palm Kernel Shell (PKS)) Market Reginal analysis

North America: In North America, the biomass fuel market for wood pellets and, to a lesser extent, PKS is shaped by strong pellet production capacity in the US and Canada and export-oriented supply chains serving Europe and Asia. Pellet mills leverage sawmill residues, forest by-products, and other woody biomass, supported by climate and renewable energy policies that favor low-carbon fuels. Domestic demand is concentrated in residential and commercial heating and selected industrial and institutional boilers, while co-firing at large utilities is more selective and policy dependent. Well-developed logistics infrastructure, including dedicated terminals on the Atlantic and Gulf coasts, underpins transatlantic and transpacific pellet trade. Sustainability expectations from overseas buyers are driving tighter certification, traceability, and chain-of-custody practices among North American producers.

Europe: Europe is the most mature and largest demand center for wood pellets and an important destination for PKS, driven by ambitious decarbonization targets and support schemes for renewable power and heat. Utility-scale co-firing and fully converted biomass power plants, district heating networks, and commercial and residential heating collectively underpin substantial pellet consumption. Nordic and Baltic countries, along with parts of Central and Eastern Europe, also act as significant producers and intra-European suppliers, creating a regional trade ecosystem. At the same time, scrutiny of forest management practices, lifecycle emissions, and biodiversity impacts is intensifying, leading to tighter sustainability criteria and preference for residues and by-products. Evolving policy frameworks and public debate are pushing market participants toward higher transparency and more robust certification across the supply chain.

Asia-Pacific: In Asia-Pacific, demand for wood pellets and PKS is expanding rapidly, led by Japan and South Korea where biomass plays a prominent role in renewable power portfolios. Power producers in these countries rely heavily on imports of industrial pellets and PKS from Southeast Asia and North America, supported by long-term offtake contracts for dedicated biomass plants and co-firing units. PKS has become a particularly attractive fuel for industrial and power applications due to its cost and status as an agro-industrial by-product, encouraging aggregators and traders in Indonesia and Malaysia to upgrade collection and export logistics. At the same time, concerns over deforestation and land-use impacts are prompting tighter sustainability requirements and adjustments to support schemes. The region is moving toward more structured, certified biomass supply chains while remaining the fastest-growing demand center for these fuels.

Middle East & Africa: In the Middle East & Africa, the biomass fuel market for wood pellets and PKS is comparatively nascent but gradually developing alongside broader renewable energy and industrial diversification agendas. A limited number of industrial and utility users are assessing imported pellets and PKS as supplementary fuels to reduce emissions from cement kilns, industrial boilers, and power plants. Local biomass potentials from forestry and agro-residues exist in several African countries, but supply chains, standards, and export infrastructure are still at an early stage. Interest from international developers in biomass power projects, often linked to development finance and climate funds, is beginning to create reference plants and operational know-how. As carbon constraints tighten and fuel diversification becomes more important, the region could see incremental growth in both domestic use and participation in international biomass trade flows.

South & Central America: South & Central America offers significant resource potential for wood pellets and PKS thanks to extensive forestry, wood-processing industries, and palm oil production in selected countries. Brazil, Chile, and other nations with established pulp, paper, and timber sectors are well positioned to produce industrial pellets from residues, serving both local users and export markets. PKS availability in palm-growing regions provides a low-cost biomass option for industrial boilers and biomass power plants, with growing interest from overseas buyers in diversifying supply beyond traditional sourcing regions. Domestic use is currently concentrated in smaller-scale industrial and commercial heating, with pilot co-firing and biomass power projects emerging in some markets. Policy frameworks for biomass vary across the region, but long-term potential is supported by resource endowment, the prospect of increased climate finance, and opportunities to upgrade waste streams into higher-value traded fuels.

Biomass Fuel (Wood Pellets and Palm Kernel Shell (PKS)) Market Analytics:

The report employs rigorous tools, including Porter’s Five Forces, value chain mapping, and scenario-based modelling, to assess supply–demand dynamics. Cross-sector influences from parent, derived, and substitute markets are evaluated to identify risks and opportunities. Trade and pricing analytics provide an up-to-date view of international flows, including leading exporters, importers, and regional price trends. Macroeconomic indicators, policy frameworks such as carbon pricing and energy security strategies, and evolving consumer behaviour are considered in forecasting scenarios. Recent deal flows, partnerships, and technology innovations are incorporated to assess their impact on future market performance.

Biomass Fuel (Wood Pellets and Palm Kernel Shell (PKS)) Market Competitive Intelligence:

The competitive landscape is mapped through OG Analysis’s proprietary frameworks, profiling leading companies with details on business models, product portfolios, financial performance, and strategic initiatives. Key developments such as mergers & acquisitions, technology collaborations, investment inflows, and regional expansions are analysed for their competitive impact. The report also identifies emerging players and innovative startups contributing to market disruption. Regional insights highlight the most promising investment destinations, regulatory landscapes, and evolving partnerships across energy and industrial corridors.

Countries Covered:

North America — Biomass Fuel (Wood Pellets and Palm Kernel Shell (PKS)) Market data and outlook to 2034

- United States

- Canada

- Mexico

Europe — Biomass Fuel (Wood Pellets and Palm Kernel Shell (PKS)) Market data and outlook to 2034

- Germany

- United Kingdom

- France

- Italy

- Spain

- BeNeLux

- Russia

- Sweden

Asia-Pacific — Biomass Fuel (Wood Pellets and Palm Kernel Shell (PKS)) Market data and outlook to 2034

- China

- Japan

- India

- South Korea

- Australia

- Indonesia

- Malaysia

- Vietnam

Middle East and Africa — Biomass Fuel (Wood Pellets and Palm Kernel Shell (PKS)) Market data and outlook to 2034

- Saudi Arabia

- South Africa

- Iran

- UAE

- Egypt

South and Central America — Biomass Fuel (Wood Pellets and Palm Kernel Shell (PKS)) Market data and outlook to 2034

- Brazil

- Argentina

- Chile

- Peru

Research Methodology:

This study combines primary inputs from industry experts across the Biomass Fuel (Wood Pellets and Palm Kernel Shell (PKS)) value chain with secondary data from associations, government publications, trade databases, and company disclosures. Proprietary modelling techniques, including data triangulation, statistical correlation, and scenario planning, are applied to deliver reliable market sizing and forecasting.

Key Questions Addressed:

What is the current and forecast market size of the Biomass Fuel (Wood Pellets and Palm Kernel Shell (PKS)) industry at global, regional, and country levels?

Which types, applications, and technologies present the highest growth potential?

How are supply chains adapting to geopolitical and economic shocks?

What role do policy frameworks, trade flows, and sustainability targets play in shaping demand?

Who are the leading players, and how are their strategies evolving in the face of global uncertainty?

Which regional “hotspots” and customer segments will outpace the market, and what go-to-market and partnership models best support entry and expansion?

Where are the most investable opportunities—across technology roadmaps, sustainability-linked innovation, and M&A—and what is the best segment to invest over the next 3–5 years?

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