Renewable energy is booming in developed economic regions like the United States and Europe. The trends are very clear—renewables such as solar and wind are rapidly replacing fossil fuels like coal. In fact, according to BP’s (NYSE: BP) 2016 Statistical Review of World Energy, renewables as a source of power generation rose robustly last year, and now comprise approximately 3 percent of global energy consumption. At the same time, coal experienced its largest decline on record.

Renewables’ share in the global energy mix does not seem like much, but it has made enormous strides over a relatively short period of time. A decade ago, renewables represented just 0.8 percent of global energy consumption. From that standpoint, global energy consumption of renewables has more than tripled in just 10 years. It is clear that significant progress is being made in fighting climate change, thanks to renewable energy. BP notes that last year, carbon emissions from energy consumption was flat. It was the lowest recorded growth in emissions in nearly 25 years. And yet, the energy revolution has just begun, particularly in under-developed economies across the world. Going forward, India could be renewable energy’s next great frontier.

India is ripe territory for renewables

India is a perfect market for renewables. It is a premier emerging economy. As part of the BRIC nations, the group of countries that includes Brazil, Russia, and China, India is growing its economy at far higher rates than the global average. The World Bank has estimated India will grow its gross domestic product by 7.6 percent this year and next year. It has a population of 1.3 billion, and a rising middle class. Finally, India receives a great deal of sunlight. This matters a great deal to the global energy mix, as emerging markets collectively comprised 58 percent of all global energy consumption last year.

India specifically has a long runway of growth ahead of it, because it is much earlier on in its development stage than more mature economies. Whereas the U.S. and Europe together made up more than half of global renewable energy consumption last year, India represented just 4 percent of all global renewable consumption. This is despite the fact that the population of India is nearly quadruple that of the United States. As with many emerging market economies, India is highly industrial. The country continues to utilize large amounts of fossil fuels, and as a result is a major contributor to the rise in harmful carbon emissions and other greenhouse gases. But this is not exactly serving the country well; approximately 400 million people still lack access to electricity, and many of those who do endure regular outages.

Fortunately, the winds of change are blowing. Consumption of renewable energy surged 13.7 percent last year, according to BP. The outsized growth is likely to continue as a result of a major commitment by the Indian government, led by Prime Minister Narendra Modi, which pledged to provide all citizens with 24-hour electricity by the end of his term in 2019. In order to accomplish this goal, India will likely need to incorporate renewables to get there. India plans to invest $250 billion in its power generation and transmission by the end of the decade, $100 billion of which will be devoted to developing renewable energy, primarily solar power. Given the abundance of sunlight in India, solar related investments in the country increased 80 percent last year. Going forward, thanks to significant cost reductions and prevalent supply, it will not be long before the economics change to the point where solar power companies can offer energy to consumers at a lower price than coal companies.

Separately, not only is India poised to reap huge growth from wind and solar, it is also making major inroads into even newer forms of renewables like biofuels, which provide energy directly from organic matter. India grew use of biofuels by 13 percent last year, far higher than the 2 percent growth in the U.S. in 2015. India still represents just 0.5 percent of the global share of biofuels consumption, which again implies a long runway of growth ahead.

The key takeaway is that as India’s economy continues to grow at high rates, sooner or later it will have to join the rest of the developed world and move toward renewable energy sources. Continuing to burn fossil fuels at such high rates will pose huge problems for India in terms of pollution and environmental damage. Fortunately, the country is ramping up production and consumption of renewables, which is a trend that is likely to last for many years to come.

Companies to watch

There are many large companies across the world that are investing in renewable energy in India, and as a result, stand to gain first-mover advantage. Swiss industrial firm ABB (NYSE: ABB) could be a beneficiary of booming renewable energy usage in India. ABB has a significant footprint in the Middle East, including India, and stands to benefit from the modernization of the power grid.

In addition, companies in the energy and industrial sectors within India are making big moves just in time for a further push into renewable energy. In June, Tata Power Company (NSE: TATAPOWER) confirmed media reports that it would seek to buy $1.45 billion of renewable energy assets from Welspun Renewables Energy (NSE: WELCORP), in the largest-ever renewable energy buyout in India. Tata Power will purchase more than 1,100 megawatts of wind and solar capacity, including nearly 700 megawatts of capacity currently in operation.

Even Japan-based diversified conglomerate Softbank (OTCMKTS: SFTBY), which has a hand in everything from telecommunications to operating a professional baseball team, has pledged to invest $20 billion in the coming years to build 20 gigawatts of solar power capacity in India. The potential capacity includes the Madhya Pradesh facility, which is the largest solar project in India, with 151 megawatts of solar power capacity. U.S. industrial conglomerate General Electric Company (NYSE: GE), through its GE Energy Financial Services arm, has invested $24 million in the project. This project will go a long way in India meeting its stated goal of generating at least 20 percent of its energy from renewable sources by 2020.

Bob Ciura is an independent equity analyst. Since 2012, his work has focused on fundamental investment analysis of publicly-traded companies in the energy, technology, and consumer goods industries. Bob has a Bachelor's degree in Finance and an MBA in Finance.