Non-conventional fuels such as shale gas and geothermal are increasingly being pursued by companies seeking to broaden Australia's energy mix and leverage the federal government's pledge to cut carbon emissions.
Shale gas hopeful New Standard Energy Ltd says it expects investor demand for shale gas could rival the recent boom in coal seam gas (CSG) in Queensland.
New Standard managing director Sam Willis says an explosion of shale gas activity in the United States over the past five years has spread to Europe "and it is only a matter of time before it comes to Australia".
"It turned the US on its head and is spreading globally," Mr Willis said.
Shale gas is type of a natural gas that exists in some deposits of shale, which is a very fine-grained sedimentary rock that acts as both the source and reservoir for the natural gas.
Shale gas can be difficult to extract and generally more expensive to produce, but technological advances had made it economically viable, Mr Willis said.
However, the chief executive of Adelaide-based energy advisory and research firm Energy Quest, Graeme Bethune, says producing shale gas remains technically difficult, "like getting gas out of concrete".
"If it was easy, we would have already been doing it," Dr Bethune said.
It was worth pursuing, however, given shale gas and gas from a variety of other sources produces substantially less carbon emissions than oil.
Shale gas also has a `green' advantage over CSG because the extraction process takes up a smaller land footprint, Mr Willis said.
New Standard hopes to sell shale gas to the domestic market or to liquefied natural gas (LNG) producers such as Woodside Petroleum Ltd that may need third party gas sources to underpin huge LNG export developments such as Browse in Western Australia's far north.
The junior explorer planned to add to its extensive tenements in WA ahead of an expected shale gas land grab, Mr Willis said.
"We're ahead of the game, positioning ourselves in a smart space," he said.
Multi-billion-dollar shale gas deals in the US and Europe by energy majors including ExxonMobil, Total, Eni, Mitsui and BP were fuelling interest in the market, Mr Willis said.
"They haven't done any deals in Australia yet, but I know they're looking," he said.
So far, only a handful of companies are seeking shale gas in Australia including AWE Ltd, Beach Energy Ltd and Sundance Energy Australia Ltd.
Dr Bethune said exploration for all forms of gas was not being sufficiently encouraged by federal and state governments despite its potential to meet more of Australia's energy needs.
"Gas is being marginalised in the debate," he said.
"Gas is tried and tested, Australia's got plenty of it, and it could play a major role in our energy future ... regardless of what kind of gas it is."
The petroleum sector's lobby group, Australian Petroleum Production & Exploration Association, also wants more incentives for gas exploration.
The federal government was instead selectively encouraging wind and geothermal projects to meet its ambitious target of 20 per cent of electricity produced from renewable sources by 2020, Dr Bethune said.
High-profile geothermal hopeful, South Australia-focused Geodynamics Ltd, has been a key recipient of government grants but technical problems at its Habanero hot fractured rocks project in SA's Cooper Basin led to a well explosion on April 24 last year.
The incident appears to have dampened investor enthusiasm for the firm, with its share price halving over the past 11 months.
But Geodynamics appears to be in the right location: SA hosts Australia's hottest rocks and is the site for the nation's first geothermal well to test a hot sedimentary aquifer, Panax Geothermal's Salamander-1.
Panax, another grant recipient, plans to have a demonstration power plant operational by 2011.
Australian Ethical Investments analyst David Macri said Panax could be the first geothermal company to reach the National Electricity Market Management Company grid.
Federal Resources Minister Martin Ferguson said at the opening of the well this month that a breakthrough was needed in geothermal energy - which promises reliable baseload power akin to a coal-fired power station - to help meet the 20 per cent renewables target.
The Australian Bureau of Agricultural and Resource Economics expects growth in geothermal energy and solar energy for electricity generation.
But this would be from a much lower base than wind, which can be deployed on a large commercial scale at a lower cost than other forms of renewable energy.
Beyond the hot rocks of SA, the WA government is stepping up geothermal action, recently granting 10 new geothermal exploration permits after awarding the state's first last year in the Perth Basin.
The new permits are mainly in the Carnarvon Basin in the state's north with the remainder in the south-east.
The potential for a geothermal sector in Tasmania is even more tantalising as it is increasingly importing power to meet its energy needs, Sydney-based KUTh Energy Ltd says.
The company claims to hold Australia's second-largest inferred geothermal resource base at its landholdings along Tasmania's east.
While corporate and policy-maker enthusiasm for renewables has strengthened, deals in the renewables space fell sharply in value and activity last year due to the economic downturn, PriceWaterhouseCoopers said on Thursday.