The decision follows an agreement between the German Ministry of Economy, Vattenfall and the two power plant operators RWE and Mibrag to bring down both the amount of lignite-based electricity and reduce the country's CO2 emissions. Closing the two units will reduce Germany's CO2 emissions by 8 metric tons each year.
The first unit will be taken out of operation in 2018 and the second one in 2019, but they will both remain in standby mode until 2020 when they will be completely shut down.
"It's a reduction of about 13 percent of our lignite-based electricity production. It's a clear reduction on our part," Vattenfall's president and CEO Magnus Hall said at a press conference Tuesday.
In return, the German government will compensate Vattenfall and two other power plant operators a total amount of SEK 2.2 billion annually over the next seven years.
Vattenfall is currently looking to sell off all of its lignite operations and mining assets in Germany, which includes a total of 10 power plants. The company has invited potential bidders to register their interest and Magnus Hall hopes the sale will go through sometime next year.
"It's a strictly confidential process but we hope to reach an agreement and put it on the government's table sometime during the first half of next year," Hall said.