German energy utilities RWE, Vattenfall and Mibrag are to halt power generation from some of their coal-fired facilities from the end of 2016, in line with government directives.
The country wants the output from facilities to be shifted to its power reserves instead, which it is paying the utilities around €1.6bn for.
As a part of the initiative, 2.7GW of brown coal plants will be kept offline, to be used only under emergency conditions when energy demands will exceed supply.
Germany intends its lignite industry to contribute for its climate protection action programme, which targets a 40% reduction in greenhouse gas by 2020 compared with the 1990 level.
In July, the country abandoned plans for imposing levies on coal-fired power plants and instead said it would pay the firms for shifting their capacities to a coal-fired reserve.
In order to achieve the target 12.5 million tonnes of emission cuts by 2020, the country will be moving ahead in a step-by-step method.
Initially, the coal-fired power units will be kept at a ‘standby’ for four years before being shutdown completely.
RWE said: "Under the agreement, lignite-fired units will be taken off the grid each for four years between 2016 and 2019.
"They will only be available as facilities of last resort for a limited period of time to safeguard power supplies."
RWE will be transferring five of its operational power plant units totalling 1.5GW into ‘standby’ mode.
The firm has 20 units operational in the Rhenish lignite area, generating over 10GW of power.
RWE CEO Peter Terium said: "Our power generation from Rhenish lignite will decline by 15%."
The firm will shift capacity from two units at Frimmersdorf, in North Rhine-Westphalia, in October 2017, followed by two more at Niederaussem in 2018 and one at Neurath in 2019.
Vattenfall has a total brown coal capacity of 8,000MW in Germany. The firm intends to transfer two 500MW units in Jaenschwalde in Brandenburg to the reserve in 2018 and 2019.
Image: Germany targets 12.5 million tonnes of greenhouse gas emission cuts by 2020. Photo: courtesy of worradmu / FreeDigitalPhotos.net.