Sweden leads in use of wood pellets for space heating. The oil crises of the 1970s and the concern for climate change in the early 1990s contributed significantly to the market development. Installation of pellet boilers in detached houses has grown tremendously, but to further improve market demand an understanding of homeowners’ perception of such heating system vis-à-vis other heating systems is required. We conducted questionnaire surveys of 1500 randomly selected owners of detached houses in autumn 2004, spring 2007 and summer 2008. Respondents consistently gave high priority to economic aspects and functional reliability in their choice of a heating system, while environmental factors were given less importance. Therefore, internalizing the external costs in homeowners heating cost might be effective in influencing homeowners to adopt environmentally benign heating systems. Respondents thought that pellet boilers had the lowest investment cost, while district heating system was most functionally reliable. Heat pumps were considered best with respect to the annual cost of heating, environmental benignity, increased market value of the house, and low greenhouse gas emission.