Archaeological excavation in Saudasjøen shows that people have been living in Sauda since the latest Ice Age. In 1349, the Plague/Black Death wiped out about two thirds of the population in Sauda, causing a decline in both population and economy. Despite this, the population was increasing during the medieval time, and a new type of industry started to grow. Along the fjord the power from several waterfalls was used to build and run sawmills, and large-scale lumber production was started. People from all over the world, especially from the Netherlands, started to trade with the citizens. This resulted in major ship traffic, giving impetus to further development of the villages and farms in Sauda. By the end of the 19th century, a new type of adventure would change the lives of the inhabitants forever. The mining industry started in the mountains of Hellandsbygd, making Sauda a small industrial town, working place and trading center for the surrounding region. But it wasn't until 1910 the real adventure started. The American company Electric Furnace Company (EFP) began the construction of Europe’s largest smelting plant. This could only be done because of the large number of waterfalls and rivers that made it possible to build power plants situated a short distance from the smelter, which uses large amounts of electricity.
Sauda's time as a farming village was over, and the people of today still live on the foundation of the new town that emerged. By the end of World War II, the Germans had finished building a large Aluminum Melting Plant in Saudasjøen, but the production was moved to Årdal in 1946. The remaining buildings were demolished by the municipality in the 1950s, leaving the industrial area in Saudasjøen empty for decades. In the 1980s, a glass production factory was established together with a couple of mechanic production factories. The population of Sauda reached its peak in the mid-1960s, approximately 6,700 inhabitants, but Sauda was not granted township status until the year 1998.
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