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Pellet Stove Furnace Pellet stoves can be used as a second heating source or, with proper venting, as a primary heating option. They are available as freestanding models or as fireplace inserts. They can provide the appearance of an old-fashioned wood-burning fireplace. The auger carries pellets from the hopper to the combustion chamber, where they are burned to create heat. Sensors detect the flame and adjust the rate of operation to maintain the desired temperature in the room. 1. Energy Effici