electricity generation mix. Following Japan's Fukushima disaster in 2011, Germany has decided to phase out nuclear energy, while Hollande has pledged that by 2025 he will reduce France's reliance on nuclear power to 50 percent from 75 percent now.
This accelerated shift out of nuclear, coupled with a boom in renewable energy such as wind and solar, is putting a strain on their power networks and could jeopardise energy security.
The source said the solar industry was an example where a lack of cooperation between the two leading European countries had let foreign - notably Chinese - photovoltaic panel makers steal a march on European industry.
Hollande's Airbus example does not mean the cooperation necessarily runs via the large listed companies that dominate the energy sector in both countries.
"The idea is not to put the likes of Siemens, Schneider or GDF Suez into one mega-company," the source said, adding that capital alliances could not be ruled out.
Cooperation will likely take the form of joint ventures and industrial alliances, and small and medium-sized companies will play a major role.
A source at a major French energy firm said management was completely taken aback by the announcement.
A government source said the existing French-German Office for Renewable Energies will drive the coordination.
"We have already established the structure. Now the ministers need to give it the necessary impetus," he said.
Former energy ministers Delphine Batho and Peter Altmaier discussed cooperation in June last year, but the sacking of the outspoken Batho and the German elections delayed the initiative.
Batho was replaced by Philippe Martin, and Merkel last month appointed SPD member Barbara Hendricks as environment minister.
Initial talks on the French-German energy initiative focused on security of supply, better interconnection of power networks and the support for renewable energies.