The 50-year-old Gaojing Thermal Power Plant is to be replaced with a gas-fired power station, one of four that is to be built as the Chinese capital aims to boost its reliance on cleaner energy, Xinhua news agency said.
The other three major coal-fired power plants in Beijing will be closed by 2016, the state-run agency added.
A five-year plan was introduced in the city last year to cut coal consumption, promote cleaner energy use and target heavy polluters, Xinhua said.
Levels of PM2.5, the smallest and most dangerous particulates, have at times been 12 times the World Health Organization's recommended maximum level during the summer, according to US embassy measurements.
However, Xinhua said the average PM2.5 in the first half of 2014 represented an 11.2 per cent year-on-year decrease.
Serious bouts of smog last year were almost 40 times the WHO limits, according to the US Embassy.
The Gaojing Thermal Power Plant is a subsidiary of the state-owned China Datang Corp.
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