The 20MW power-to-heat (PtH) project will begin construction this year and be online by 2021, the project partners said.
Often electricity generated in the north of Germany is curtailed when supply is high and demand is low. To avoid the loss of this "green" power, the project partners hope to put it to better use.
"PtH units work like oversized electric kettles and play an increasingly important role in the energy system of the future. This way, energy can be used across different sectors, which experts call "sector coupling" between electricity and heat," the companies explained.
Stadtwerke Rostock will be responsible for the construction of the P2H unit in Marienehe, while 50Hertz will manage the transmission integration and manage any potential grid bottlenecks.
Dirk Biermann, chief markets and system operations officer at 50Herz said: "Both economically and ecologically, we should strive to use electricity instead of curtailing it.
"The use of green power for heating or supplying hot water is a useful alternative for curtailment, so that renewable resources can also be exploited when there are bottlenecks in the electricity transmission grid."
This week, a group of five wind organisations in Germany called on the government to alter electricity taxes in order to promote sector coupling.