Kiran Bhatraju, founder and CEO of Arcadia, joined Episode 38 of the Factor This! podcast to discuss the role of data in upending the energy industry’s long-held power dynamics. Subscribe wherever you get your podcasts.

Kiran Bhatraju’s path to founding and leading Arcadia, the billion-dollar climate tech darling, didn’t begin with a deep-seated passion for environmentalism.

Bhatraju grew up in the heart of Appalachia. Coal mines and power plants reigned supreme in his hometown of Pikeville, Kentucky, both as its economic lifeblood and a power source. But it was the utility sector’s unmatched power, not the polluting smokestacks, that drew him to the energy industry.

Early in his career, Bhatraju worked as a legislative aide to then-Rep. John Yarmuth, who represented metro Louisville in the U.S. House of Representatives from 2007 to 2023. In that role Bhatraju learned how deeply intertwined energy is with politics.

“I saw that from working with utilities that this was one of the more corrupt industries in America,” Bhatraju said on the Factor This! podcast.

The utility structure bothered Bhatraju. A monopolistic business model fueled by a regulatory rate-of-return-on-dollars-invested paradigm was the toughest to grasp, especially as new, distributed options presented cheaper and cleaner solutions to the same problems.

“I just felt like this was an industry I could work on,” he said. “It was obvious that this was going to be one of the biggest economic transitions in history, and I was all in.”

Bhatraju realized that meter-level data held immense value. And that data, held tightly by distribution utilities, would be “paramount” to deploying distributed energy resources (DERs).

He noticed a similar evolution in the financial sector. There, technology companies like Plaid were connecting third-party apps (Venmo, Robinhood, etc.) to institutional bank accounts, while providing an enhanced user experience.

“Someone had to build that data pipeline (for energy),” Bhatraju said. That became his underlying conviction from the beginning: “data is going to be foundational to deploying DERs at scale.”

He founded Arcadia in 2014. At the time, the company was a bit ahead of the market. At the time, Tesla was facing production challenges with its Model 3, rooftop solar was growing in some markets, but the energy storage sector essentially didn’t exist.

Today, millions of these devices are connected to the grid. No longer fitting the moniker of “startup,” Arcadia now manages more community solar capacity than anyone else. And its software platform, Arc, uses data from thousands of utilities to upend the industry’s long-standing power dynamics.

Arc fuels the rapid deployment of distributed energy resources by pinpointing where, and when, to build and use DERs. The platform analyses rate and tariff structures in jurisdictions around the world to maximize each asset’s value and impact.

The ubiquitous use of online customer accounts opens the door to utility data for Arcadia. While the company has formed direct data relationships with some progressive utilities, 90% of the data the company accesses today is through customer accounts with their permission.

That data, once aggregated and synthesized, is enabling a paradigm shift within the energy industry. And, according to Bhatraju, we haven’t begun to scratch the surface of the possibilities.

Aligning incentives for all

Fundamentally, Bhatraju said he believes that distribution utilities should focus on distributing power, not generating it, and take on a “coordinator” role to manage DERs. That transition won’t take place now, or ever, without incentives for distribution utilities.

The economics support that business model, too. Transmission and distribution costs are going up, while generation costs continue to dive thanks to new technology. Plus, the monopolistic piece of the business involves poles and wires, not power plants.

Bhatraju acknowledges that utilities are in a challenging position, especially as aggregated DERs inch toward wholesale market participation, and institutional investors expect ever-improving dividends and returns.

He believes regulators should structure performance-based utility rates to incentivize distribution buildout, rapid permitting, and the embracement of technology and data to manage a world with millions of distributed devices.

“Now, that’s really hard. It’s a lot of change,” Bhatraju said, adding “I would love to see that.”

Bhatraju expects the utility business model to dramatically change in the coming decades. How fast will be determined by how rapidly regulators align incentives.

Arcadia’s next step

Bhatraju said he wants Arcadia to help deploy DERs long into the future. To do that, the public investment markets present an enticing opportunity.

Arcadia thinks it has a compelling story to share about climate change and the energy transition, and there aren’t many publicly traded, pure-play climate tech software companies today.

While an initial public offering is likely down the road for Arcadia, that time is not now, Bhatraju told the Factor This! podcast. That’s due, in part, to ongoing macroeconomic turbulence.

“We’ll be ready when we want to be public,” Bhatraju said.