Small renewable projects left in lurch
Climate tech start-ups averted a crisis when the U.S. 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 — that other companies often avoided because of the legal and tax paperwork burden involved.
“Since deposits were guaranteed, the risk has moved from small, earlystage 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. So-called community solar projects, which typically allow customers who are unable to install their own panels to get power from larger farms. The developments, which tend to be smaller than utilityscale projects, allow a wide variety of individuals, businesses and nonprofits to benefit from sun-generated power.
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 U.S., 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 U.S. 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
“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 start-up that operates a software platform to sign up and manage community solar subscribers.
Renewables developers across the world are facing financing pressures from rising interest rates and higher inflation affecting raw material costs. For companies in the U.S., 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.