J.P. Morgan leads $200M investment in Arcadia’s clean-energy platform

When Arcadia launched in 2014, it had a simple purpose: to help residents power their lives with clean energy. It accomplished this by getting permission from customers to access their utility bills and then matching them with the renewable power sources that suited them best. 

The startup moved on from renewable energy credits to overseeing signups for community solar projects — a money-saving source of clean energy for people who can’t put solar panels on their own roofs. Arcadia has since signed up customers for 700 megawatts’ worth of community solar.

Now the company is pursuing a bigger vision. It’s done the grueling work of translating datasets from hundreds of electric utilities into one digital platform, called Arc. The goal is to help customers access even more clean-energy services by inviting other companies to use its datasets — still with permission from customers — so they can customize their offerings.

These efforts have won the approval of J.P. Morgan, the legacy bank with a brand-new sustainable private equity team. That team led a $200 million investment, announced Tuesday, to grow Arcadia’s consumer energy data platform globally. The investment valued the startup at $1.5 billion, making it an official ​“unicorn” in Silicon Valley parlance.

In an industry that often gets bogged down tinkering with hardware and convincing cautious utilities to give it a try, Arcadia has found a way to use software to speed the adoption of clean energy at scale.

“You’re not going to see rapid decarbonization without this data,” CEO Kiran Bhatraju told Canary Media. ​“This is the foundational software layer for the energy transition.”

The data Arcadia has collected on its platform is technically available to customers via their utility logins, but historically it has been hard to act upon. And the information generally wasn’t accessible to companies that want to develop a rooftop-solar proposal tailored to a home’s real power consumption, or an electric car manufacturer that wants to show drivers exactly how much they’ll pay to charge up an EV under their utility’s rate structure. 

“Arcadia is a company that allows consumers easy access to clean energy,” said Tanya Barnes, co-managing partner at J.P. Morgan’s sustainable growth equity team. ​“And it’s a company that provides data to businesses to build their own clean-energy offerings.” 

The funding round also brought in Broadscale Group, Keyframe Capital and Triangle Peak Partners as new investors.

Clean-energy software development is a burgeoning business. Aurora Solar discovered immense investor appetite for software to serve the solar industry when the Bay Area company raised another $200 million this spring at a $4 billion valuation. Arcadia’s latest raise and valuation hint at the possibilities for software that cuts across the full breadth of the clean energy industry.

Today, community solar. Tomorrow, the world.

Arcadia now has years of experience linking customers to community solar projects. Even as the company expands its data platform business, the direct-to-consumer community solar offering will remain a priority.

“We’re committed to that business and being in every state we can as the market grows,” Bhatraju said. 

Barnes noted that community solar has ​“a tremendous amount of runway on its own as the fastest-growing segment in solar energy.” But that’s just one use for Arcadia’s database of electricity usage and billing info. From the beginning, Arcadia aspired to have a more expansive impact.

“Seven years ago, it was a little early, and we decided to go direct to consumer,” Bhatraju said. ​“There are thousands of companies now that need this data.” 

In that sense, Arcadia aspires to be a clean-energy analog to Plaid, the open-banking fintech startup. You’ve probably relied on Plaid if you’ve ever linked a new app to your bank account just by inputting your username and password. Making that connection easily and securely has unleashed all sorts of new ways to manage finances in the smartphone era. Plaid is worth more than $13 billion and has garnered investments from numerous finance incumbents, including J.P. Morgan.

Arcadia is essentially a Plaid for utilities. If, say, Ford wants to tell drivers of electric F-150s how much they’ll be paying to charge their trucks at home, it needs data on dozens of utilities that each have different electric rates and policies and database architectures. Drivers will pay different rates if they get their electricity from Georgia Power or Pacific Gas and Electric or Florida Power & Light.

Unifying all those different datasets is the kind of procedural problem that almost nobody wants to have to think about. Bhatraju called the process ​“gnarly.” But his team figured it out for utilities serving 80 percent of the U.S. population. 

The sheer amount of work that was required to pull that off creates something of a strategic ​“moat” for Arcadia. If another startup wanted to compete, it would have to replicate all that work on a utility-by-utility basis. In the meantime, Arcadia will be selling clean energy to customers and getting paid by clean-energy companies that do business with its software infrastructure.

Room to grow globally

Arcadia is continuing to grow the community solar capacity that it manages on behalf of customers. But it’s also expanding into commercial energy services, which follow a whole different set of rules than residential. The startup can scale both of those offerings globally. And as it makes headway in serving the energy needs of other businesses, it can take things a step further by supporting carbon accounting.

When corporations pledge to zero out their carbon emissions, they need to figure out how much carbon they actually emit and where it comes from. Utility-grade tracking of energy use is a critical piece of that.

J.P. Morgan brings a number of partnership opportunities beyond just the funding, Bhatraju noted. The investment banking division already operates a Center for Carbon Transition that helps corporate customers work through the ramifications of their climate commitments. With the investment in Arcadia, the sustainable growth equity team now has a vetted portfolio company that it can recommend to the bank’s clients.

Wall Street hasn’t been shy about financing large-scale renewable energy projects over the years. But J.P. Morgan’s sustainable growth equity team — led by Tanya Barnes and Osei Van Horne — focuses on four more up-and-coming decarbonization sectors: real estate; transportation and supply chain; food and agriculture; and industrials and manufacturing. 

Although J.P. Morgan regularly tops the list of banks lending the most money to the fossil fuel sector, in January the bank committed $150 million to its new sustainable private equity team. Unusually for an investment shop, the team boasts an in-house climate scientist: Sarah Kapnick, who joined after years at the National Oceanic and Atmospheric Administration. Kapnick sits on the investment committee to analyze the climate implications of potential portfolio companies.

The Arcadia deal comes a few months after Goldman Sachs led a $250 million private equity investment in Hydrostor, which stores clean energy by compressing air into underground caverns. The message in both cases is the same: Big banks are providing serious capital to clean-energy startups that have proven they’re ready to grow.