The challenge is to increase the local biomass feedstock utilisation based on sustainable bioenergy production in the farms and villages of Lapland. Decentralised bioenergy production in rural area is framed within sustainable regional development and SME support activities; it aims at reaching self-sufficient energy production in communities (farmers, energy SMEs and public premises). This is seen as an efficient way to improve living conditions of members of rural communities. Local energy production creates a local market for biomass replacing the consumption of fossil fuels, for which capital leakage from the communities is huge. Arctic smart rural community cluster supports a holistic model of circular economy including energy self-sufficiency and food production. Energy production consists of comprehensive utilisation of local resources and bio-based feedstock including forestry and farming residues. Higher value products are included in the value chain, but the biggest benefit (input-output ratio) for the community is achieved by producing biofuels, electricity and heating.