The continual use of fossil fuels results in an increase in CO2 concentration in the atmosphere which leads to global climate change. The huge energy demand of our society is causing fossil fuel resources to diminish rapidly. Therefore, it is critical to search for alternative renewable energy resources to protect the environment and to meet the future energy demands. Biomass is abundant, inexpensive and has the potential to replace fossil fuels. Oxy-fuel combustion is one of three main CO2 capture technologies that can be applied to commercial power plants. The combustion of biomass in an oxy-fuel power plant could yield a significant, additional CO2 reduction, or even lead to negative CO2 emissions. However, biomass oxy-fuel combustion technology is still in the developing phase and further research is still required in order to fully clarify the consequences of its implementation in power plants. In the present study a bubbling fluidized bed reactor (BFBR) with a capacity of 20 kW is designed, manufactured and successfully tested for biomass combustion. A sintered plate was used as the distribution plate and Garside 14/25 sand with a sauter mean diameter (d32) of 0.78 mm was used as the bed material. The minimum fluidization velocity (Umf) of 0.51 m/s was experimentally determined with air at ambient temperature. The biomass screw feeder was tested with three different types of biomass feedstocks: wood pellets (WP), miscanthus pellets (MP) and straw pellets (SP). The feeder was found to be able to provide continuous and smooth feeding without any blockage for all three types of biomass pellets. The temperature profiles in the BFBR during combustion were found to be smoothly distributed along the reactor throughout the operation. With the help of a water-cooling heat extraction probe, the average temperatures within the main combustion zones were successfully controlled to be in the range of 750–850 °C. The concentrations of the main components in the flue gas have shown the expected dependencies on the stoichiometric ratio (SR). The average values of the flue gas components CO2, CO, O2 and NOx were found to be in the range of 14.85–18.64%, 0.29–0.70%, 1.67–5.94% and 40.08–63.30 ppm respectively with a different SR ratio from 1.10 to 1.45. The average temperatures distribution throughout the reactor were in the range of 655–850 °C.