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Cleaner Tech

SVB Failure Leaves Small US Solar Projects Needing New Ally

Some solar-power ventures could face delays as developers are forced to find new sources of finance. 

Contractors install rooftop solar panels in Sacramento, California, in 2018. 

Contractors install rooftop solar panels in Sacramento, California, in 2018. 

Photographer: David Paul Morris/Bloomberg
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Climate tech startups appear to have averted a crisis after the US government moved to backstop the failed Silicon Valley Bank and guarantee deposits. But questions remain over one renewables niche in which the lender had developed a specialty, and where projects may now need to find a new ally.

SVB was perhaps best known in the renewables world for supporting small-scale projects, including so-called community solar projects, which other lenders often avoided because of the onerous legal and tax paperwork.

“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 who can’t install their own rooftop solar panels to buy power from local solar farms instead, which can help to lower their electricity bills. Some states have moved to enable the construction of community solar farms, which tend to be smaller than utility-scale projects, and then sell the power to nearby homes and businesses that subscribe to the program. About 5.6 gigawatts of community solar has been installed in the US in total, equivalent to the generating capacity of five or six big natural gas or nuclear power plants. That total is 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 bank’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-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, the Inflation Reduction Act that was passed last year offers $370 billion in subsidies and tax credits, which should help offset some of the higher costs and may encourage manufacturing to diversify supply chains.