Statue of Sam Eyde, one of the founders of Norsk Hydro and Rjukan.

In 1906, the area which would become Rjukan consisted of only a few farmsteads, then called Saaheim, when Norsk Hydro began planning saltpeter (fertilizer) production in the area using the newly developed Birkeland–Eyde process.[1][2] Rjukan was chosen because the Rjukan Falls, with a 104-metre (341 ft) longest single fall, provided easy means of generating the large amounts of electricity that was required.

The Vemork hydroelectric power plant was built between 1907 and 1911, and was at the time the world's largest hydroelectric power plant. A similar power plant was finished in Såheim in 1915. The power plants had a combined cost of more than 200 million kr, the equivalent of two annual national budgets at the time.[3] With the factories, many houses for the factory workers also had to be built, in addition to a train station and a town hall. The town formally changed its name to Rjukan, and in 1920 reached a population of 8,350.[1]

In 1934, Norsk Hydro built a hydrogen plant next to the Vemork power plant. A by-product of hydrogen production via water electrolysis was heavy water. It was the later Nobel prize winner Odd Hassel who told Norsk Hydro that they were in fact in possession of the only regular heavy water production in Europe. At the time heavy water was believed to be a necessary component of an atomic bomb. When Norway came under German occupation during World War II, destroying this production became an important priority to the Allies. The facilities were sabotaged twice by the Norwegian resistance movement and bombed by allied forces.[4]

After 1960, most of Norsk Hydro's saltpeter production in Rjukan was transferred to factories at Herøya in Porsgrunn.