The Impact of the SVB Collapse on Clean Energy Projects

The collapse of Silicon Valley Bank (SVB) on March 10, 2023—the largest US bank failure since the 2008 global financial crisis—has damaged the lending ecosystem that supports startups and project developers working on the energy transition.

The initial focus has been on the collapse’s impact on cash flow for companies with deposits in the bank, illustrated by potential payroll issues. In the clean energy space, Sunrun, the biggest residential solar company in the US, was singled out, its share price falling to a 4-month low over concerns about its exposure to SVB. However, Sunrun has stated that it has access to $80 million that had been with SVB. Since then, with the FDIC announcement that all deposits in the bank would be guaranteed, the potential risk of cash deposit losses has receded.

SVB Was an Initial Project Risk-Taker

However, the impact of the SVB collapse on the industry could go beyond short-term cash flow issues. Data from SVB’s website indicated that it had $3.2 billion committed to innovation projects in clean energy. In addition, financing vehicles for clean energy projects in which the bank participated are now in limbo, leaving hundreds of billions of dollars in project financing deals at stake.

Large-scale solar or wind projects are now well understood by the finance industry; those projects affected by the collapse might suffer a short delay but should be able to find financing partners willing to take any SVB share. The impact on smaller distributed energy resources (DER) projects, on the other hand, could be more significant. This is especially true for DER projects with niche solutions, like energy storage and community solar (an area in which SVB had a large presence), or areas with customized technology packages like microgrids.

In the end, the most damaging part of the collapse will be the loss of the institutional knowledge accumulated over the years, which had enabled SVB to understand risks better than other banks, allowing it to finance areas of the energy transition that others would not touch. It is still unknown whether the teams SVB developed will be kept intact once its bankruptcy is settled, but if not, the energy transition will have lost a valuable financial supporter.