The company has teamed up with energy management company Dalkia to create a £65 million state-of-the-art operation that generates renewable energy from "spent wash" - a mixture of wheat, malted barley, yeast and water produced during distillation.
Diageo says it will be first to integrate sustainable technologies such as anaerobic digestion and biomass conversion on a commercial scale.
It also believes this will be the largest single investment in renewable technology by a non-utility company in the UK, and will cut carbon emissions at the site by some 56,000 tonnes - the equivalent of taking 44,000 family cars off the road.
The plant will provide 98% of the thermal steam and 80% of the electrical power used at the distillery. It still needs planning permission, but is expected to be built over the next two years.
"This will be a showcase bioenergy facility which harnesses
green technologies in a project of an unprecedented scale in our industry," said Diageo Scotland managing director Bryan Donaghey.
way forward in terms of our environmental ambitions
Campbell Gemmell, chief executive of the Scottish Environment Protection Agency, said: "SEPA welcomes the use by industry of efficient, sustainable energy sources. We are very supportive of new and developing technologies that can help protect Scotland's environment and make a meaningful contribution to tackling climate change. Diageo is to be commended for its investment in bioenergy."