Located at Boddam, 2 miles (3 km) south of Peterhead in Aberdeenshire, the Peterhead Power Station was built by the North of Scotland Hydro-Electric Board to meet the increasing demands of economic development, between Aberdeen and Peterhead, relating to the oil industry. Construction began on a 20 ha (50 acre) coastal site in May 1973 and cost £230 million. Cooling water could be drawn directly from the sea and harbour facilities were available nearby for the unloading of fuel-oil The station was initially configured with two 660 megawatt generators designed to run on oil or gas, the first brought into operation in 1980 and the second in 1982. Initially intended to use North Sea oil, price rises resulted in a change to gas (piped directly from the Brent Field), which would otherwise have been flared off as waste because the processing plant at Mossmorran had not yet been constructed. By 1984, oil again became more economic, although by 1989 plans were made to extend the facility to a total capacity of 1550 megawatts by adding a 230 megawatt gas-fired station, fuelled by the entire gas output of the Miller Field. This is a highly efficient plant which also benefitted from low pollution.
The flexibility to switch between oil and gas remains valuable in coping with the unpredictability of future international markets and Peterhead's ability to handle varying compositions of gas (methane, propane and butane) makes it one of the most advanced power stations in Europe. A renovation completed in 2000 has brought the installation of three new 250 megawatt turbines, the waste steam from which will continue to power one of the original 660 megawatt generators, making the station one of the most efficient in the UK.
Peterhead power station employs around 160 people and is run by the privatised Scottish & Southern Energy Plc (previously Scottish Hydro-Electric), headquartered in Perth, with an annual turnover of £2.3 billion (2006).