The crunch meeting at Merkel's office in Berlin will bring together senior politicians to thrash out an emotive issue that will determine future energy policy in Europe's largest economy and one that riles ordinary Germans.
The explosive debate centres around what to do with Germany's 17 nuclear reactors that Merkel's predecessor Gerhard Schröder had decided to mothball by around 2020.
Merkel wants to postpone the shutdown as part of a new energy concept for the country, which she is set to present to her cabinet on September 28.
She calls the extension a bridging measure, to cover energy needs until renewable sources such as wind and solar power can produce more of Germany's power as it seeks to reduce dependence on coal.
But the question raging in the country and the government is how long to extend for and what price to exact from the energy industry - which would profit enormously from such a move - in exchange.
Merkel's coalition has tumbled in recent opinion polls and surveys suggest a majority of Germans oppose the idea of a postponing the date that the country goes nuclear-free.
Large street protests are planned on September 18, an unwelcome development for Merkel who faces six crucial regional elections next year which analysts say could be crucial for her second term in office.
The chancellor, a former environment minister herself, has hinted that her preference is for an extension of 10-15 years, saying this is what is "technically reasonable."
But not everyone in her squabbling coalition agrees, with Environment Minister Norbert Röttgen, from Merkel's own conservative Christian Democrats, saying last week he wanted to limit the extension to eight years.
But Economy Minister Rainer Brüderle, from the pro-business Free Democrats, Merkel's minority coalition partners, contradicted Röttgen, saying he wanted an extension of up to 20 years.
A government-commission report last week was intended to bring clarity but with so many variables, not least predicting future electricity and oil prices and demographics, it ended up highly inconclusive.
It did however outline how high the stakes are.
Without nuclear power, the report said, Germany can forget its target of reducing CO2 emissions by 80 percent of 1990 levels in 2050.
Environmental pressure group Greenpeace heaped scorn on the report and accused Merkel of yielding to the powerful nuclear energy lobby, a charge echoed by an increasingly confident opposition.
"Ten or 15 years extension. That sounds harmless, but it's not," said Tobias Riedl, Greenpeace's nuclear energy expert, on Friday.
Another item in the mix is a debate over how to make energy companies such as RWE, Vattenfall and EON pay for the extension of their plants and ensure a greater contribution to Germany's energy output from renewable sources.
As part of an €80-billion austerity programme for the period 2011 to 2014, Berlin wants to tap energy firms for €2.3 billion per year, a quid pro quo for keeping their plants open for longer.
But the utility companies are putting all their considerable lobbying powers into resisting such a levy and the nuclear tax was not in the austerity package the cabinet approved Wednesday.
Furthermore, Merkel has a tricky legal scenario on her hands, as she needs to ensure any draft law would not be subject to approval in the Bundesrat upper house, where she lost her majority earlier this year.