The university has said the region faces "severe energy business and social challenges" including a high concentration of intensive manufacturing, poor quality air and areas of electricity grid constraint.
The investment will help Tyseley Energy Park, developed by Webster and Horsfall’s 300-year-old manufacturing business, become the "energy and waste nexus" for the city, the university has said, showing how "novel energy technologies can form an innovative industrial ecology".
The funding builds on the plans of the West Midlands Combined Authority to support the development of four Energy Innovation Zones across the region.
The university intends to develop skills and training within TEP, together with collaborative research and development of manufacturing to help companies successfully engage with the revolution that is happening in transport, energy and the circular economy.
Prof Martin Freer, from the University of Birmingham, director of the Birmingham Energy Institute, said:
"We are extremely excited by the opportunity of working with Webster and Horsfall in the development of Tyseley Energy Park.
"This is a fantastic opportunity for the University to put back into the city of Birmingham as it develops as a place which is at the centre of the energy transition in the UK; the energy capital. "
David Horsfall, Webster and Horsfall, said:
"We are delighted to welcome the University of Birmingham to Tyseley Energy Park and by working together we have a great opportunity to create clean energy technologies and infrastructure.
"We recognise that the University of Birmingham is one of the top Universities in the UK and by working in collaboration with the both the public and private sector as well as a work class academic institution, Tyseley Energy Park will drive forward change and attract major investment into this region.
"The potential of this site is huge and by working in collaboration with world class partners Tyseley Energy Park will develop a Distributed Energy System that includes renewable and low carbon generation that marks a shift away from fossil fuels for energy generation delivering a greener and cleaner ecosystem for Birmingham and the West Midlands."