What Silicon bank collapse could mean for climate
The collapse of Silicon Valley Bank could have major implications for startups working to reduce planet-warming emissions, potentially undercutting President Joe Biden’s climate agenda.
The Biden administration took steps over the weekend to avert the immediate failure of companies that relied on the California-based lender, including thousands of climate technology and low-carbon energy businesses. But it has yet to find a buyer willing to take on SVB’s domestic lending portfolio.
That has left some major companies scrambling to secure new lines of credit, write POLITICO’s E&E News reporters Corbin Hiar and Avery Ellfeldt.
“[It] is a major blow to early-stage and even late-stage tech startups looking to get financing,” Daniel Ives, a technology sector analyst at Wedbush Securities, told Corbin and Avery.
The banking crisis, which is the largest U.S. failure since the financial collapse of 2008, comes at a critical moment for climate technology, just as the administration is beginning to roll out the $369 billion in clean energy incentives in the Inflation Reduction Act. Scaling up the country’s ability to produce low-carbon power and remove planet-warming pollution from the atmosphere is key to meeting national and international climate commitments.
How SVB tanked: The bank, which has catered to the tech industry for decades, largely housed its assets in government bonds whose value started to plunge as the Federal Reserve raised interest rates. That set off a panic among depositors who moved to withdraw their money. The bank didn’t have enough cash on hand to pay depositors, so regulators shut down operations — in other words, an old-fashioned bank run.
The administration’s weekend intervention, which created a backup fund to loan money to eligible banks, aims to prevent bank runs at other lenders by convincing depositors their dollars are in good hands.
Green fallout: The collapse has hit regional banks particularly hard, which is bad news for environmental startups, especially ones that don’t have established business models. That’s because midsize banks are generally more amenable to working with niche sectors or smaller markets.
Community solar projects, in which a group of homeowners goes in together on a large off-site installation, have boomed thanks to the support of midsize banks. SVB was a major player in the space, participating in more than 60 percent of community solar financing deals.
Climate tech companies are now waiting to see if the financial industry treats the collapse as an isolated incident or a larger problem that merits tightening lending standards for startups.
“If the reaction in the industry is instead that this is a systemic problem, that’s going to have a much larger, much more pernicious impact on climate tech,” said Ethan Cohen-Cole, a former economist at the Federal Reserve Bank of Boston who now leads the direct air capture startup Capture6.
It’s Tuesday — thank you for tuning in to POLITICO’s Power Switch. I’m your host, Arianna Skibell. Power Switch is brought to you by the journalists behind E&E News and POLITICO Energy. Send your tips, comments, questions to [email protected]
Today in POLITICO Energy’s podcast: Ben Lefebvre breaks down the Willow oil project, how the administration is defending its approval and the reaction from environmentalists.
Murkowski’s long game — For nearly two years, GOP Sen. Lisa Murkowski of Alaska waged an ultimately successful pressure and education campaign to move President Joe Biden to approve the Willow oil project in her state, writes Emma Dumain.
“When he was first was elected, I made sure that he knew — by way of letter, by way of any time I saw him — I would mention [Willow] until it became almost a bit of a joke because he knew that I was going to raise it,” Murkowski recalled.
“And equally so with his senior team. I made clear that they knew.”
Legal battle begins
A coalition of environmental groups filed a quick legal challenge against the the Biden administration’s decision to approve the controversial Willow oil project in Alaska. The groups argue the approval violated four environmental laws, writes Alex Guillén.
The new high-profile legal brawl aligns the Biden administration and Republican lawmakers against environmentalists who have largely backed the president’s climate agenda, writes Niina H. Farah.
The Biden administration today announced $2.5 billion in funding to extend the coast-to-coast network of electric vehicle chargers, writes Andres Picon.
The Charging and Fueling Infrastructure discretionary grant program will complement the $5 billion in funding announced last year to put EV chargers every 50 miles along interstate highways.
A tepid approach
Soaring power prices in Europe last year prompted calls for a dramatic overhaul of the EU’s wholesale power market, writes Gabriel Gavin.
But on Tuesday, the European Commission put forward a much more cautious proposal mainly focused on shielding households and businesses from future price surges.
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Natural gas’ growing dominance of the U.S. power supply is facing a potentially serious stumbling block: a string of failures in keeping the lights on during the harshest winter storms.
Maryland is driving toward an EV future after a state air quality panel voted Monday to phase out new gasoline-powered passenger vehicle sales by 2035.
Rhode Island’s request for offshore wind bids attracted just one confirmed proposal Monday — from Danish offshore giant Ørsted A/S.
That’s it for today, folks! Thanks for reading.
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