UPDATE 3-Merkel wants to delay nuclear extension-sources

* Sources say Merkel wants to delay nuclear extension

* E.ON declines comment

* Merkel agreed delay with FDP party leader Westerwelle

(Adds political reaction in pars 6, 11-13)

By Markus Wacket

BERLIN, Oct 9 (Reuters) - Chancellor Angela Merkel wants to postpone any decision on extending the lifespans of Germany's 17 nuclear energy reactors until after a key state election in May 2010, government and industry sources said on Friday.

"The chancellor's view is that there should only be a very general formulation in the coalition agreement," one source involved in coalition talks told Reuters. Merkel's preferred centre-right alliance won last month's federal election.

A previous centre-left government of Social Democrats and Greens began a 20-year phase-out of nuclear power in Germany in 2000. But Merkel's conservatives and the Free Democrats (FDP), who are in talks to form a new government, have both voiced support for extending the lifespans of plants judged safe.

Merkel's Christian Democrats (CDU) are keen to hold onto power in North Rhine-Westphalia, Germany's most populous state. Opinion polls show a clear majority of Germans opposed to extending nuclear power.

"Merkel does not want any decision before the election in North Rhine-Westphalia," the government source said.

Another political source said that Merkel has already agreed to that timetable with the leader of the FDP, Guido Westerwelle.

Such a move to postpone a decision on nuclear energy would be disappointing for utilities, which have been hoping a centre-right coalition would move quickly to scrap the 2000 law phasing out nuclear power.

German utilities such as E.ON (EONGn.DE), RWE (RWEG.DE), EnBW (EBKG.DE) and Vattenfall [VATN.UL] all operate highly profitable nuclear plants.

A spokesman for E.ON did not want to comment on the Reuters report. "It's a decision that's up to the government," the E.ON spokesman said.

NEXT SUMMER

E.ON Chief Executive Wulf Bernotat had said recently, however, he reckoned it could take until next summer before the new government makes any decision on extending nuclear power.

But Merkel's decision nevertheless caught by surprise some in her conservative party and in FDP who see themselves as advocates to industry, sources close to the talks said.

They said that Economy Minister Karl-Theodor zu Guttenberg and Baden-Wuerttemberg state premier Guenther Oettinger were not happy about Merkel's decision. The issue will be discussed at a CDU party executive meeting on Monday.

Oettinger would have to defend the extension of nuclear power in his re-election campaign in 2011, the sources said.

In the coalition talks, environment leaders in Merkel's conservatives and the FDP also have reached a draft agreement that throws up high hurdles for utilities hoping to extend the lives of their nuclear plants.

The draft only allows an extension of nuclear plants that could withstand a plane crash, sources said.

"Older plants will be allowed to continue operating only if they have protection against a plane crash that is comparable to the standards in the newest plants," according to a draft obtained by Reuters.

High levels of protection -- such as fog-creating systems to prevent aerial attack -- could make it prohibitively expensive to continue operating older nuclear plants, according to industry leaders.

The environment leaders from the two parties in their working group also agreed that Germany should obtain "at least 30 percent" of its electricity production from renewable sources by 2020 -- up from 15 percent currently.

"Our goal is that the majority of energy in Germany will come from renewable sources by the year 2050," the draft said. (Reporting by Markus Wacket; additional reporting by Tom Kaeckenhoff; writing by Erik Kirschbaum; editing by Keiron Henderson and Sue Thomas)