According to the government's climate change adviser, Australia is underusing its renewable energy sources with rooftop solar photovoltaic and wind having the potential to become the cheapest form of power for retail users by 2030 or earlier as carbon prices rise.
The Climate Commission in its report, generating a Renewable Australia said that Australia will need to shift from an electricity network designed around a few large generators to one where power sources are distributed around the country.
The report said that "We have less than four decades to transform energy systems around the world to energy sources that do not contribute to climate change."
According to the government's science agency Geoscience Australia, Australia has the highest average solar radiation per m2 of any country.
Australia is targeting to generate 20pc of electricity from renewable source by 2020. About 10pc of energy production in now generated from renewable. The renewable energy target is a key part of the government's plan to reduce greenhouse gas emissions by 5pc by 2020 from 2000 levels.
However, about 75pc of Australia's electricity is produced from coal. The power sector accounts for about 36pc of the country's GHG emissions.
The government in its energy white paper released earlier this month said that Australia could require investment of up to AUD 200 billion by 2050 to reduce power sector emissions significantly. About AUD 18.5 billion has been invested in renewable energy for power generation in the past 10 years.
The government has asked regulator the Australian Energy Markets Operator to study the implications of generating 100pc of power from renewable sources based on 2 scenarios by 2030 and 2050.
The commission said that renewable energy targets were set by 118 countries last year, more than double the number in 2005. Almost 754,000 Australian households and businesses had installed solar panels as of July 2012. And wind power produces 26pc of South Australia's total electricity, higher than any major country.