You must have 2-Step-Verification enabled before setting up an application password.

1. Visit your App passwords page. You may be asked to sign in to your Google Account.
2. At the bottom, click Select app and choose the app you’re using. You can also select Other and enter you own custom app name.
3. Click Select device and choose the device you’re using. You can also select Other and enter you own custom device name.
4. Click Generate.
   
5. Be sure to copy the password that was generated.