Prime Minister Malcolm Turnbull has described a world-first coal-to-hydrogen project in the Latrobe Valley as playing a critically important role as the fuel of the future.
The prime minister was at Loy Yang A power station today to launch the trial of the Hydrogen Energy Supply Chain project, in partnership with Australia and Japan.
"It is critically important we invest in the energy sources of the future and we affect the transition from old forms of [power] generation to new forms of generation, and we do this seamlessly," Mr Turnbull said.
"Getting the transition right is critically important."
The PM spoke in front of around 200 people including Jobs Minister Michaelia Cash, and a gathering of representatives from the Japanese consortium behind the project, which is led by Kawasaki Heavy Industries.
The HESC project will use Loy Yang coal to create low-emissions hydrogen at an adjacent site, and then transport the gas to Japan via Port Hastings.
Construction should start early next year, following planning approvals, and the first hydrogen shipment is expected in 2020 to 2021.
The industry is expected to be worth $1.8 trillion by 2050.
The hydrogen will be mainly used in Japanese fuel-cell electric vehicles and power generation.
The project will create 400 jobs in its first stage, before it progresses into a commercial phase pending the success of the pilot, where it could potentially generate thousands more jobs.
If it proceed to the commercial phase, it will use carbon capture and storage technology to sequester emissions created during the process, which would be stored depleted gas reserves in Bass Strait.
Both the Victorian and federal governments will contribute $50 million each toward the half-billion dollar project.
Mr Turnbull later told the press that he was "looking forward to hydrogen being used as a fuel in Australia".
"We ship a lot of resources overseas, it gradually creates a lot of jobs. We are a trading-oriented economy. Just remember, this is 400 jobs in the Latrobe Valley," Mr Turnbull said.
"Australia is a trading nation, that's why I'm fighting very hard to open-up more markets for Australian exports."
Japanese Vice-Minister for Industry Daisaku Hiraki said hydrogen had a long-term future in his nation's energy demand in a de-carbonised society.
"Both Australia and Japan have a responsibility to make it a successful project, so we can be the driver for global initiatives towards a hydrogen-enabled society, while contributing to the world-wide response to global warming," Mr Hiraki said.
Victorian Regional Development Minister Jaala Pulford said Gippsland's abundance of brown coal, carbon storage sites and access to ports made it a unique environment.
"Our government refuses to believe the Latrobe Valley's best days are behind it. Quite contrary, we believe the Latrobe Valley's best days are ahead," Ms Pulford said.
"The Latrobe Valley is going through a period of economic transition, and this project and partnership is an essential part of this story in the Latrobe Valley."