The city has also secured a £30,000 feasibility study paid for by the UK Government into expanding the number of such vehicles and increasing dedicated charging points.
It is competing with Birmingham, Cambridge, Coventry, Nottingham, Oxford, Sheffield and the West Yorkshire Combined Authority, with the winner announced next April.
The news comes four months after Dundee taxi firm 203020 launched one of the UK’s largest electric fleets, comprising 30 Nissan LEAFs.
Such vehicles are seen as helping to improve air quality in cities, where diesel fumes cause health problems.
203020 owner David Young said Dundee had some of Scotland’s worst air pollution.
Moira Weir, of the Transport Research Institute at Edinburgh Napier University, said: “Taxis provide a vital part of the transport network. However, because black cabs are primarily diesel powered and concentrated on corridors that already suffer from high levels of local air pollution, any initiative that will help cut the particulates and nitrogen oxides that they cause is to be welcomed.”
UK Transport minister Andrew Jones said today: ”Plug-in taxis are cheaper to run, better for the environment and an example of Britain leading the way in an innovative industry.
“That is why the UK Government is investing £500 million in low emission vehicles over the next five years to make them an accessible and affordable choice for all.
“These cities have shown they are committed to adopting greener technology and the Government is backing their ambition by showing the benefits a share of £20m of funding could deliver.”
Craig Melville, convener of Dundee City Council’s environment committee, said: “This announcement is great news for the people of Dundee.
“The city is already ahead of the game when it comes to the use of low emission vehicles with the council leading the charge by using 62 in its own fleet, and by encouraging and supporting the use of electric vehicles with the installation of the infrastructure for charging vehicles.
“There are currently 69 charging points spread across Dundee.
“Funding for the feasibility study will help us to tackle air quality and other environmental issues faced by Dundee and other major cities.”
Philip Sellwood, chief executive of the Energy Saving Trust, which will carry out the feasibility studies, said: “Our experience in this area gives us every confidence that organisations as diverse as licensing authorities, car manufacturers, district network operators and charge-point installers can become leading players in rolling out ultra-low emission taxis and private hire vehicles right across the country.”
Nissan said the LEAF had a range of around 80 miles for city driving.
The models can be charged from zero to 80 per cent in 30 minutes using rapid chargers, which have been funded by the Scottish Government’s Transport Scotland agency.
It backed the project as part of £17m funding over two years for low carbon vehicle initiatives across the country.
Transport minister Derek Mackay, who launched the scheme in March, said: “In addition to the environmental benefits and fuel savings, the smoothness and quietness of a ride in these taxis will undoubtedly be appreciated by drivers and passengers alike.”