Boston, MA -- (SBWIRE) -- 08/22/2013 -- Coal and gas underpin Australia's energy market and will continue to do so during the course of our 10-year forecast period. Domestic coal production is strong, offering plentiful natural resources, and the government is also favouring unconventional sources of gas - including controversial shale gas. This, plus a boost in liquefied natural gas projects, will help boost the contribution that thermal fuels makes to the electricity mix. But Australia also has ambitions in the renewable energy sector, with a goal of 20% of electricity being generated by renewable sources by 2020 - government publications go as far as to state that this figure will rise to 40% by 2035. One of the ways the government hopes to achieve this is through a carbon tax, introduced in July 2012, but the accompanying increase in electricity prices has not been welcomed by the public. The government refuses to buckle under the pressure to reduce its renewable target. And in our view, this underlines the authorities' commitment to the renewable energy sector.

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The latest Australia Power Report from BMI forecasts that the country's power consumption will rise from an estimated 212.6 terawatt hours (TWh) in 2012 to 261.3TWh by the end of the forecast period in 2022.

Thermal generation - comprising coal, gas and oil - is expected to increase by an average 1.6% per annum between 2012 and 2022, while renewable sources of energy will post the strongest gains; with average growth of 8.4% during the period.

A mature market, Australia represents an attractive investment prospect, given its stable regulatory environment and the electricity demands of its energy-intensive industries. But Australia's vast size creates challenges in terms of energy transmission and distribution.

Australia is ranked second, behind the US, in BMI's regional Developed States Power Risk/Reward Ratings, thanks to its low risk profile and competitive landscape. Australia has a particularly strong risk profile, with the country's sound business environment a key factor in raising its score for this component.

Key developments in Australia's power sector include:

- Australia's government introduced a carbon tax on July 1 2012, which is factored into generators' bids for wholesale electricity generated from fossil fuels. While lower-income and vulnerable population groups are protected from dramatic increases, most users have faced higher electricity bills as a result. In May 2013, the government revised the carbon price projection downwards for 2015-2016, from AUD26 per tonne to AUD12 per tonne.

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