The energy required for air compression is the largest cost item for oxygen separation from air by pressure swing adsorption technology (PSA). This paper aims to demonstrate the potential of water-injected compressor technology for energy savings for small oxyfuel combustion units that use PSA technology as an oxygen source. Additionally, the utilization of waste heat from the compressor was further examined for the dewatering of biomass. Based on the performance data presented for available commercial water injected compressors, 2 % of electrical energy can be saved compared to oil lubricated single compression as a reference case. The waste compression heat released was capable of drying the burned wood and saving 10.4 % of the wood to obtain the required thermal load.