Australian Gas Infrastructure Group's Hydrogen Park Murray Valley project will house a 10MW electrolyser next to a wastewater treatment plant in Wodonga near the Victoria-NSW border.
The electrolyser, which extracts hydrogen from water molecules, will be eight times larger than the biggest currently operating in Australia and, once completed, will be the largest on the east coast.
The project will receive $36.1m in federal funds via the Australian Renewable Energy Agency and $12.3m from the Victorian government through the Department of Energy, Environment and Climate Action.
ARENA CEO Darren Miller said the project was paving the way for renewable hydrogen in Australia.
"It's essential to scaling up Australia's renewable hydrogen industry that we get these first-generation projects up and running," Mr Miller said.
The renewable hydrogen will initially be blended in with natural gas in existing distribution networks to supply roughly 85,000 people along the state border.
Adding 10 per cent hydrogen is estimated to reduce carbon dioxide emissions by 4000 tonnes each year.
Federal climate change and energy minister Chris Bowen said renewable hydrogen would create economic opportunities in Australia's net zero transformation.
"The move to cleaner energy brings enormous job opportunities and both the Victorian and Commonwealth Governments are seizing that opportunity," Mr Bowen said.
The project would create 55 jobs during construction, the federal government said.
Victorian energy minister Lily D'ambrosio said the project was a significant step to build renewable hydrogen capability and drive investment across the east coast.
"Having the east coast's largest electrolyser just off the Hume Highway in Wodonga will provide exciting opportunity for industry and renewable energy for years to come," Ms D'Ambrosio said.
"We're delivering more renewable energy options to Victorians to ensure we can continue to grow our industry and economy as we work towards net-zero by 2045."
AGIG chief executive Craig de Laine said the infrastructure owner-operator was proud to be working with state and federal governments on a landmark project.
Construction will begin this year, with operations set to kick off in 2025.
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