Unlike other renewable energy sources, biomass can be converted directly into liquid fuels, called "biofuels," to help meet transportation fuel needs. The two most common types of biofuels are ethanol and biodiesel.

Ethanol is an alcohol, the same as in beer and wine (although ethanol used as a fuel is modified to make it undrinkable). It is made by fermenting any biomass high in carbohydrates through a process similar to beer brewing. Today, ethanol is made from starches and sugars, but NREL scientists are developing technology to allow it to be made from cellulose and hemicellulose, the fibrous material that makes up the bulk of most plant matter. Ethanol is mostly used as blending agent with gasoline to increase octane and cut down carbon monoxide and other smog-causing emissions.

Biodiesel is made by combining alcohol (usually methanol) with vegetable oil, animal fat, or recycled cooking grease. It can be used as an additive (typically 20%) to reduce vehicle emissions or in its pure form as a renewable alternative fuel for diesel engines.