The Tasmanian Government has announced it will invest $50 million to encourage the development of a hydrogen energy industry in the state.

What is renewable hydrogen? Hydrogen is a carrier of energy

Hydrogen is a carrier of energy Renewable hydrogen is produced by purifying seawater, then separating the hydrogen and oxygen via electrolysis

Renewable hydrogen is produced by purifying seawater, then separating the hydrogen and oxygen via electrolysis The process of separation is powered by solar or wind energy

The process of separation is powered by solar or wind energy The hydrogen becomes a vehicle for storing renewable energy such as solar or wind

The hydrogen becomes a vehicle for storing renewable energy such as solar or wind It is converted into transportable forms for export

Tasmania's Renewable Hydrogen Action Plan includes $20 million for a Tasmanian Renewable Hydrogen Fund, another $20 million in concessional loans and $10 million dollars for support services.

In a statement, Premier Peter Gutwein said the Government's goal was to have a renewable hydrogen generation facility up and running by 2022-2024.

The Government has identified Bell Bay in the state's north and Burnie in the north west as potential hydrogen industry hubs.

"Our vision is to … be commercially exporting hydrogen by 2030, creating hundreds of local jobs and injecting billions into the Tasmanian economy," Mr Gutwein said.

Hydrogen alone is not actually a fuel source in itself — it is carrier of energy.

Hydrogen gas can be produced by splitting water molecules, H2O, into hydrogen and oxygen atoms through the process of electrolysis.

It can then be condensed into a liquid fuel source, which can be used to power cars in a similar way to diesel, or it can be used to generate conventional electricity.

An example of the hydrogen fuel cell that will power a facility in Gladstone, Queensland. ( Supplied: Northern Oil )

Energy Minister Guy Barnett said a 100-megawatt renewable hydrogen production facility had been found to be a viable first-stage.

"Bell Bay is well suited to host a 100MW facility and has the capacity to expand to a 1,000MW facility by 2030 and expand further if national and international demand grows as predicted," he said.

"The plan indicates that a 1,000MW renewable hydrogen facility (approximately enough power for 1 million households) would create an estimated 1,000 to 1,200 local jobs, and support a further 2,000MW of renewable energy investment in our state."

The funding will be delivered through an expression of interest process, which is due to open in coming weeks.

George Town Mayor Greg Kieser said Bell Bay was an ideal site for a hydrogen plant.

"We're really thrilled that they see in the strategic advantage that Bell Bay has in terms of access to rail, deep water, electricity, supply chain and all those good things that really make it a compelling destination to stand up one of these facilities," he said.