The auction system implements parts of a wide-ranging package of bills passed by the German government in June to arrange the long-term exit from coal mining and generation activities by 2038.
"The tenders create an incentive to quickly take the most climate-damaging hard coal-fired power plants off the grid. At the same time, security of supply remains guaranteed," said Jochen Homann, president of the federal network regulator, the Bundesnetzagentur.
Last year, a total 20,000 MW of hard coal plant capacity supplied 9% of Germany's generation output.
A series of tenders will be carried out between 2020 and 2027, in which operators will declare the price at which they would be prepared to shut their plants in return for funds to offset some of their financial losses.
The maximum price in the first round would be 165,000 euros (148,928 pounds) per MW of generation capacity, the Bundesnetzagentur said in a statement.
The ultimate price decided upon would take into account bidders' offers and the relevant CO2 emissions levels of the plants in question.
Some operators of plants run on imported hard coal have complained that they face heavy write-downs on their assets under the rulings.
They have raised objections to utility incumbents such as RWE and Uniper - that mine domestic brown coal and then burn it in adjacent plants - being set to receive high, fixed compensation to fund lay-offs and help affected regions.
Unlisted Steag, which operates 5,500 MW, last week said it was preparing to challenge the coal exit conditions in the country's constitutional court to secure higher payments, citing interference with ownership rights.
(Reporting by Vera Eckert; Editing by Michelle Martin)