Toyota's Altona factory will become a renewable energy hub to promote the use of hydrogen to power cars, with a $3.1 million funding injection from the Australian Renewable Energy Agency.

"Hydrogen has the potential to play a pivotal role in the future because it can be used to store and transport energy from wind, solar and other renewable sources to power many things, including vehicles," Toyota Australia president Matt Callachor said on Tuesday.

"Right now, the biggest factor to the success of hydrogen being widely available is the lack of infrastructure.

"The sooner we move to a zero emissions society the better, and Toyota is committed to making this a reality."

Toyota will contribute the rest of the cost of the $7.4 million centre, which will be repurposed into Victoria's first integrated hydrogen site.

The centre will produce at least 60kg of hydrogen each day, with on-site solar panels and battery storage providing electricity to support the energy requirements of the project.

Global annual demand for hydrogen as an energy source is expected to grow from about one million tonnes in 2019 to about 35 million tonnes by 2040.

"Australia has the potential to be a world leader in hydrogen because of our abundant energy resources and proximity to emerging export markets in North Asia," Energy Minister Angus Taylor said.

He said the federal government has also commissioned the development of an ambitious national strategy on hydrogen.

ARENA chief executive Darren Miller said the Toyota plant would pave the way for more renewable energy-powered vehicles in Australia, which has been slow to take up electric cars.

"The demonstration of low-cost hydrogen production and distribution is key to the uptake of hydrogen-powered electric vehicles in areas such as truck, bus and government fleets," Mr Miller said.

Australian Associated Press