The present amount of biomass used for heat, and to a smaller extent electricity production, is already considerable in several European countries but the potential unused in Europe is even higher. Combustion is the most mature conversion technology utilized for biomass. The systems addressed in this paper are plants with a nominal boiler capacity greater 0.5 MW th. The main combustion technologies used for these systems are underfeed stoker furnaces, moving grate firings (over-bed stoker fired units), bubbling and circulating fluidized beds. The most important biomass fuels are sawdust, wood chips, bark, straw, cereals and grass. The essential differences between them are their different combustion behaviour as well as the different concentrations of combustion relevant elements (such as N, S, Cl, K) they contain, influencing the necessary combustion, process control and flue gas cleaning technology. Important points that are now under development focus on possibilities of NO x reduction by primary measures, as well as on higher plant efficiencies by efficient biomass drying by well adjusting the excess oxygen level in the flue gas to the requirements for a complete combustion and by recovering energy from the flue gas. Furthermore, possibilities of influencing the material fluxes of ash forming elements by primary measures aiming at a sustainable ash utilization and an efficient dust precipitation are in progress. Problems still unsolved that need comprehensive R&D in the near future are reactions taking place in the hot flue gas, causing depositions and corrosion in furnaces and boilers (especially when K-, S- and Cl-rich biomass fuels such as straw, cereals and grass are used). Research on possibilities to prevent or control them (by material selection or appropriate technologies) are of great importance. Furthermore, the ash melting behaviour and its influencing variables have to be treated as urgent. Staged combustion systems, hot fly ash precipitation as well as specially designed boilers could represent solutions for these ash and aerosol related problems. Combined heat and power (CHP) production, already realized in plants with a nominal boiler capacity greater 10 MW th based on steam turbines, is also of growing importance for small-scale applications. Moreover, the lower limit for CHP plants is a nominal boiler capacity of about 5 MW th at the moment, due to the lower electric efficiencies achievable and to the economy of scale. Interesting technologies which are right now under development are sterling engines, a newly developed steam engine (screw-type motor) and organic rankine cycles (ORC) with hydrocarbons as working fluids operating at low temperature and pressure levels (in comparison with conventional steam processes). The basic requirements for the selection of an appropriate CHP process are a high electric efficiency to investment costs ratio and a well tested technology to ensure a continuous and undisturbed operation of the plant.