The Balmenach Distillery in Speyside, north-eastern Scotland, is receiving finance from the Green Investment Bank (GIB) to install the technology, which will replace the plant's existing oil-fired boilert.
It is the third Scottish distillery to benefit from a £5m funding pot for energy efficiency in distilleries from the GIB and the private sector, with each project getting between £1m and £1.5m funding.
Tomatin Distillery, near Inverness, and Aberfeldy Distillery, in Perthshire, have already received cash to install biomass boilers, with Tomatin Distillery reducing its greenhouse emissions by around 80 per cent and slashed its fuel costs.
The Balmenach Distillery is so remote it is off grid and currently reliant on oil to meet its energy needs.
The new boiler, used to produce steam for the whisky production processes, will reduce energy costs by almost a third and cut greenhouse gas emissions by 5,000 tonnes a year.
It will use wood pellets sourced from local, sustainably managed forests and made at Invergordon by the boiler's operator, Balcas.
The distillery will pay back the investment from the savings it will make.
Balmenach Distillery dates back to 1824, making it one of the oldest in Speyside, and after closing in 1993 it was bought in 1998 by Inver House Distillers Group which is owned by Asian drinks business ThaiBev. It also produces the Caorunn premium gin.