In the context of global warming and dependence on fossil fuels, modern bioenergy systems have appeared as important sustainable energy solutions with a large untapped potential in Sweden and the rest of the European Union. Small-scale pellet heating systems for space heating of small houses is one of these solutions. In Sweden, such systems have relative advantages over oil- or electricity boiler systems both in terms of greenhouse gas emission reduction and total lifetime cost of equipment and fuel. However, so far the market diffusion process of this technology has been rather slow. This paper, by employing concepts and insights from the literature of evolutionary economics and sociology, studies the factors involved in the diffusion of such systems.