This quest begins when you reach the institute grounds at the end of the "Scholastone" quest. Your next objective will be to find and speak with the dean.
Meet with the dean who oversees the institute. He likely knows the true nature of the ominous energy detected here.
Go to the location marked on the map and you will meet Dean Grundir there. He will ask you to follow him because he wants to introduce you to someone.
Follow him, and after a moment, you will reach a spot where you meet Octavius. This will end this quest and start the next one.
Sharing Alustin's penchant for speaking in riddles, the dean claimed the experiments in the plaza are a necessary defense against coming chaos. He encouraged you to provide assistance with the research.