Iodine or mercury initially found in fish used as organic fuel (7)
I believe the answer is:
biomass
'organic fuel' is the definition.
'iodine or mercury initially found in fish' is the wordplay.
'initially' says to take the initial letters.
'found in' is an insertion indicator.
'fish' becomes 'bass' (bass is a kind of fish**).
The initial letters of 'iodine or mercury' is 'iom'.
'iom' placed within 'bass' is 'BIOMASS'.
'used as' is the link.
(Other definitions for biomass that I've seen before include "Measure of living organisms" , "Organic source of energy" , "source of 8 [RENEWABLE ENERGY]" .)