Hamburg's municipal heating company has signed a letter of intent with the three companies to develop a 100 megawatt (MW) facility to extract hydrogen from water through electrolysis, it said.
Hydrogen produced at the so-called Green Energy Hub would be derived from wind and solar power, the statement said. Hydrogen produced using fossil fuels is not carbon free.
The technology is part of Germany's plan to decarbonise its economy by 2050.
The planned Hamburg plant is one of a number of similarly sized projects currently awaiting final investment decisions which will be needed to bring hydrogen output in Europe's biggest economy closer to commercially viable levels.
"This is a bold venture that now needs to be filled with life," said Jens Kerstan, head of the supervisory boards at public sector Waerme Hamburg and Gasnetz Hamburg.
The partners plan to apply for funding from European Union programmes under Important Projects of Common European Interest (IPCEI), they said. Subject to a final investment decision, production could start in 2025.
The plant would be located at Moorburg, a Hamburg suburb where Vattenfall is idling its conventional coal-to-power generation plant to avoid heavy carbon pollution from coal burning.
Moorburg is connected to high and low voltage grids. If additional hydrogen imports are needed, ships can call at the site directly via the Elbe river, with discharging services offered at the city's port.
The municipal gas grid's hydrogen pipeline could also be expanded within 10 years.
The region also includes many potential consumers of green energy, the partners said.
Major industrial businesses in the area whose processes are currently highly carbon intensive include aluminium producer Trimet, steelmaker ArcelorMittal, and copper smelter Aurubis.
(Reporting by Vera Eckert; Editing by Kirsten Donovan and Jan Harvey)