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Fitch Ratings is one of the three largest credit rating companies along with Moody’s, and Standard & Poor. When it has an opinion about a company, everybody sits up and listens. Last week, Fitch revealed that battery technology is starting to disrupt the way utilities and oil companies do business.
Why Battery Technology Interests Fitch
Nearly 25% of open corporate bonds raised finance from auto companies, and utilities that depend on fossil fuels. Were the $3.4 trillion involved start to dry up, this could have a major impact on the world economy. The driver is the alternative energy fields appearing everywhere we look, including geothermal.
Fitch wants the utilities and auto companies to react early and start diversifying into batteries, renewables, or natural gas. Fitch is not saying this because it wants them to go green. It is simply saying they should do this from a business perspective. It wants them “to guard against the risk that the markets turn against them.”
The Increasing Influence of Disruptive Technology
This is not the first time Fitch has touched on the term ‘disruptive technology’. Disruptive innovations create new markets and may eventually replace existing ones. An example of this would be the internal combustion engines that replaced Pony Express horses. This time, it is the internal combustion engine’s turn to gradually give way to solar, wind and ocean power.
Fitch does not consider electric vehicles a significant threat just yet. Reasons it mentions are long lifespans, and slow roll outs of supportive infrastructure such as commercial recharging stations. It could take 20 years before electric vehicles constitute 25% of the global car fleet. However, the rating agency thinks the tipping point for oil companies could come sooner.
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