The futuristic project will research and test zero-emission trucks and buses running on the water-based fuel from the city's Deakin University campus.

We asked the experts to explain what all the talk is about.

Federal Education Minister Dan Tehan on Monday announced $2 million for the Warrnambool campus to kick-start the idea.

The university came close to shutting in 2016 due to low enrolments, but Deakin's leaders say the hydrogen centre will now be a "pillar" of the campus' future.

"The future for this campus has to rely on us looking to new things, not simply replicate the undergraduate portfolio we had in the past," vice-chancellor professor Iain Martin told The Standard.

The hydrogen project will give another string to the campus' research bow, currently known for marine science.

But the project requires further government and private-sector investment of up to $18 million, with Deakin providing its land and expertise but no further financial contribution.

"It has to be remembered that Deakin is contributing about $9.5 million a year to keep the Warrnambool campus vibrant and alive," Dr Martin said.

"Government has recognised that, and they're not asking for a co-contribution from Deakin."

Dr Martin said he hoped to secure the project's funding in stages during the next five years.

It will bring 12 jobs in the short-term and up to 200 in the long term. Students won't benefit in the short-term, but South West TAFE has committed to training the site's future workforce.

Hydrogen is a chemical that makes up two parts of the H20 water molecule, and it's known to be the universe's most abundant chemical.

"That is one of it's particularly attractive characteristics, it is everywhere," Deakin's energy director professor Adrian Panow explained.

Kept at a standard temperature and pressure, hydrogen exists as a gas. Known to humans as a substance for about 250 years, only in the past decade has it become a possible fuel for mass-produced electric vehicles.

To create clean hydrogen, scientists split water molecules into parts using electricity, and then collect and store it.

The cleanliness of the hydrogen depends on the electricity used to make it.

"Green hydrogen" is produced using 100 per cent renewables.

The university plans to build a hydrogen transition centre on 4.5 hectares at the campus.

It will include a refuelling station for buses and trucks accessible from the Princes Highway, and Warrnambool Bus Lines and truck manufacturer Kenworth have committed to trialling hydrogen-powered vehicles there.

The south-west has been earmarked for the project because of its ties with haulage and transport industries.

Dr Martin said at first researchers would establish the logistics to store and use hydrogen for commercial vehicles safely.

"The first stage of this project is not just about the engineering, it's all the other pieces that need to happen. If you go back 150 years before we had distribution networks of petrol, it was completely ad-hoc," he said.

"We will have to condense that into three to five years."

To ensure the hydrogen is "green" the university will enter a power contract that guarantees its power comes from a renewables. Deakin is also in talks about transitioning the campus' natural gas to hydrogen.

Hydrogen is expensive, but Deakin is betting the price will drop.

Dr Panow said the cost of hydrogen needed to fall to about a quarter of its current price to compete with natural gas and diesel. Dr Martin said he was confident hydrogen would be a "key plank" to Australia's future energy mix.

"We are at the point where the solar industry was 20 years ago, we need to see year-on-year improvement," he said.

"We will get there but only if we start to do this type of project, if Australia waits someone else will start on the march and all we will be doing is importing overseas technology."

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