This paper assesses the increase in demand and supply for forest biomass for heating in Norway in 2020. By then there is a political aim to double the national production of bioenergy from the level in 2008. The competitiveness of woody biomass in central and district heating is analyzed in a model selecting the least-cost heating technology and scale in municipalities given a set of constraints and under different fuels price scenarios. The supply of forest biomass from roundwood is estimated based on data of forest inventories combined with elasticities regarding price and standing volumes. The supply of biomass from harvesting residues is estimated in an engineering approach based on data from the national forest inventories and roundwood harvest. The results show how the production of bioenergy is affected by changes in energy prices and support schemes for bioenergy. One conclusion from the analyses is that the government target of 14 TWh more bioenergy by 2020 is not likely to be met by current technologies and policy incentives. The contribution of the analysis is the detailed presentation of the heat market potentials and technology choices combined with supply functions for both roundwood and harvesting residues. (C) 2011 Elsevier Ltd. All rights reserved.