The Fall of a Climate Bank
As someone who used to work at Brex in San Francisco, a Silicon Valley Bank competitor, we looked at SVB with a competitive spirit and admiration. I once crashed an SVB event for founders at a taco restaurant in the Mission — they were undeniably a historical force in the ecosystem. I’m a techie who, despite spending most of her time in New York these days, always says, “there is no place in the world like silicon valley — the SV mindset is just unparalleled.” Those who worked in tech in the Bay Area and have gotten used to billboards featuring corporate credit cards, database management systems, and CI/CD tools will know what I’m talking about. SVB was at the heart of all this, and it is heartbreaking to watch this institution burn to the ground.
In addition to startups and technology, other areas I care deeply about are clean energy and re-imagining the electrical grid for the future. Community solar came under the national (and international) spotlight as publications such as NYT, Bloomberg, MarketWatch, pv magazine and HEATMAP reported on the repercussions of SVB’s demise.
Community solar is often dubbed by industry leaders as “the future of solar” because it serves the massive market of renters and residential/commercial buildings not serviced by rooftop solar.
Bloomberg points out that “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.”
In my anecdotal experience speaking to community solar developers, I have not heard SVB mentioned as frequently as a financier per se (I do hear USBank, Wells Fargo, Fifth Third and other regional banks), but the numbers on SVB are remarkable: It was leading or participating in 62% of community solar financing in the US, and committed 3.2B+ to project finance. It has ten years of experience supporting project finance deals in climate tech, and more than 1,550 customers in the broader climate and sustainability sector. Kiran Bhatraju, CEO at Arcadia, mentioned that “Silicon Valley Bank was in many ways a climate bank. When you have the majority of the market banking through one institution, there’s going to be a lot of collateral damage.”
On SVB’s Project Finance page, we can see that its beneficiaries included Sunrun, AES, Rad Energy Solutions, Longroad, Soltage, Boralex, and Vivint.
Most the initiatives featured are large-scale projects with substantial scale and financing needs. SVB provided debt and equity financing, and even corporate cards and cash management for the project holding companies — very fitting!
- Fuel Cell Company Case Study — Daroga | Silicon Valley Bank
- Renewable Energy Company Case Study — Longroad Energy | Silicon Valley Bank
- Solar Company Case Study — Sunrun | Silicon Valley Bank
According to BloombergNEF, the bank financed about $357M of residential solar between 2020 and 2022.
To fill the void created by SVB’s fall, it’s expected that other financiers including regional banks and other kinds of debt investors might step in. Bhatraju also said, “Other financiers will step in, but pipelines will be on hold for some time as those new relationships get sorted out.”
The IRA has earmarked $390B in subsidies and tax credits for the climate sector, and more than $28 billion of venture capital was invested in climatetech start-ups last year.
SVB’s collapse leaves many solar developers looking for loans and lines of credit. Since project financing is such a critical component of a project’s construction, developers might experience delays. And the clock is ticking for the tax credits and subsidies from the generational IRA budget, many of which wind down in the early 2030s.
Dimitry Gershenson of Enduring Planet, a lender to climate companies, said he was working with other investors to create an emergency fund for affected companies. In just 24 hours, they received nearly 100 applications, representing >$500 million in assets at risk.
SVB’s demise does not mean that there will no longer be project financiers willing to step in as debt or tax equity sponsors. As far as I can tell, the broader solar/wind industry is awash in capital due to the massive tax benefits for developers and financiers alike. But the difference is that not every lender is the ideal type of lender. SVB had a special connection with the sector by dedicating talent and other forms of financial and corporate services to developers and climatetech companies. Not every bank will understand the underwriting nuances and structures of different kinds of energy projects (utility-scale, PPAs, VPPAs, community solar).
I like David Gelles’s (NYT) take that “there are signs that, when the dust settles, the climate tech industry will have a new lender of choice.”
The industry has aggressive targets to hit, such as 100% clean electricity by 2035. And it must deploy the massive IRA budget within the next decade. As with every crisis, there is an opportunity to learn, adapt, and iterate — and we’ll have to move fast.
