Some solar-power ventures could face delays as developers are forced to find new sources of finance.
(Bloomberg) — Climate tech startups averted a crisis when the US government moved to backstop the failed Silicon Valley Bank. But the lender had developed a specialty for smaller renewable projects — and those may now need to find a new ally.SVB was best known in the industry for managing smaller renewables projects — including community solar projects — which other companies often avoided because of the legal and tax paperwork burden involved.“Since deposits were guaranteed, the risk has moved from small, early-stage companies that might have struggled to make payroll, to those that might be reliant on the bank’s credit facilities for infrastructure projects,’’ said Mark Daly, head of technology and innovation at BloombergNEF. Community solar projects allow customers to get power from local solar farms if they aren’t able to install their own panels, helping to lower their power bills. The developments tend to be smaller than utility-scale projects. About 5.6 gigawatts of community solar have been installed in the US, with that figured slated to double in the next five years, according to the Solar Energy Industries Association.It’s not yet clear how much financing SVB was offering to community solar developers. The firm’s website says it was leading or participating in 62% of financing in US developments. It had more than 1,550 customers in the broader climate technology and sustainability sector, and it has committed $3.2 billion to innovation projects in the field.The bank financed about $357 million of residential solar — which doesn’t include community solar — between 2020 and 2022, according to BloombergNEF. Those who may step in to fill the void include regional banks and other types of debt investors. “Other financiers will step in, but pipelines will be on hold for some time as those new relationships get sorted out,” said Kiran Bhatraju, chief executive officer of Arcadia Power Inc., a Washington, D.C.-based startup that operates a software platform to sign up and manage community solar subscribers.
Renewables developers, like other businesses, are facing rising interest rates and higher prices for raw materials. For companies in the US, Biden’s Inflation Reduction Act that offers $370 billion in subsidies and tax credits, should help offset some of the burden of higher costs and encourage manufacturing that will diversify supply chains.
Read more: Everything We Know About How the US Is Handling the SVB Crisis
SVB customers will get all their insured and uninsured fund starting Monday, the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. said in a joint statement Sunday. That crucial move has helped to reassure the climate tech industry that the bank’s failure won’t mean a dramatic slowing of the energy transition.
Still, “companies have been reminded that risks they probably were not even thinking of, such as deposit security, can unexpectedly emerge.” said Varun Sivaram, group senior vice president for strategy and innovation at Orsted AS. “This swift resolution means that start-ups might conduct a risk review and then go on with the important work of scaling their businesses and technologies, which, in the climate space, is absolutely critical for meeting our collective goals.”
–With assistance from Todd Woody, Shoko Oda and Josh Saul.
(Updates with context on community solar and potential investors in fifth, sixth paragraphs.)
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