This buzzy startup raised $70 million to slash your energy bill and provide you with renewable power

• Arcadia is a digital platform that aims to give users more options for buying energy, which has long been controlled by large utilities.
• The DC-based startup has raised more than $70 million from big investors including Energy Impact Partners and G2VP, a venture fund that spun out of Kleiner Perkins in 2016.
• Arcadia has about 400,000 members in the US and it's growing quickly, with numerous community solar projects in development, according to a company spokesperson.
• Here's everything you need to know about Arcadia.
• Click here for more BI Prime stories.

When you order a meal online, you're presented with a bevy of options. You can choose what to eat and whether you want the restaurant to include plastic cutlery, for example.

The same goes for buying a car, traveling, and pretty much everything else that involves spending money

Except for when you're buying the electricity that powers your home, that is.

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Startups like Arcadia are trying to change that.

Arcadia and rivals like Bulb are among a crop of startups that want to make it easier for consumers to pick where their energy comes from, offering them both lower costs and cleaner choices. While small now, they could challenge much of the business of traditional utilities. And the benefits for consumers can be substantial, as Arcadia says its customers can save upwards of 20%.

"Utilities have put customers to sleep for a hundred years," Arcadia CEO and founder Kiran Bhatraju said. "This a massive old monopoly industry that didn't give people options."

How Arcadia creates demand for clean energy

Arcadia and its investors are betting that more consumers will switch to clean energy if the process is quick and user-friendly.

"What Arcadia is doing is they're creating bottoms-up demand for clean energy, and they're simplifying the way that a clean energy product is presented to the end customer," said Sameer Reddy, a partner at the $1.2 billion investment firm Energy Impact Partners (EIP), which has invested in Arcadia.

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The startup has raised over $70 million, including a $30 million round in December, a spokesperson said, and it has plans to grow its 400,000-strong user base. It was founded in 2014 and is based in Washington, DC.

Getting more people to buy clean energy could also benefit the environment. Electricity generation accounts for about a third of energy-related emissions each year in the US.

What happens when you sign up for Arcadia

Arcadia's pitch to customers is simple: Clean energy at a low cost and a utility bill managed through a user-friendly digital platform.

What happens behind the scenes is a lot more complicated.

When you sign up, Arcadia takes over your utility bill. That means you pay Arcadia for power, not your utility.

Without any work on the customer's part, Arcadia "matches" half of your energy use with wind power. It does this by purchasing what are called renewable energy certificates (RECs) from wind farms around the country on your behalf.

You can also opt to match 100% of your energy with wind power through RECs, though you'll pay a premium of about $10 a month.

RECs are a way for energy companies to track the power that comes from renewable sources. One REC is essentially a guarantee that one megawatt-hour (MWh) of renewable energy is generated somewhere, according to John Rogers, a senior energy analyst at Union of Concerned Scientists, a nonprofit. Often, it's in another part of the country.

When Arcadia matches half of your power with RECs, it's guaranteeing that a wind farm somewhere in the US is producing energy equivalent to half of your monthly usage - though you don't actually receive the electrons those turbines generate.

RECs cost Arcadia money, so a free matching program, on its own, is a net loss to the startup. Arcadia makes up for that, and generates cash, by acting as a kind of middleman in the electricity market for many of its customers.

Arcadia's offerings depend on where you live

Arcadia's biggest benefits are for customers in parts of the country with deregulated energy markets or that have policies that support community solar projects.

In a regulated market, there are single utilities that own and manage the entire energy supply chain, from generating power to delivering it to customers over the power lines. Arcadia can't do as much in those areas.

In other parts of the country, including much of the Northeast, this process is separated. Power-generating companies in these regions sell energy in an open marketplace for utilities to buy.

If you live in one of those regions and sign up for Arcadia's Smart Rate program, Arcadia will search for the cheapest source of energy on the market, regardless of the kind of fuel source. It's kind of like bargain shopping for energy.

Arcadia operates a shared savings model, meaning that it pays itself some of the money its customers save. Plus, it gets a payment from the companies generating power that it buys, Bhatraju said.

In several states including New York, Illinois, and Rhode Island, Arcadia also offers a program for community solar, which Bhatraju says is the "best product in the market."

If you sign up, Arcadia connects you - and potentially hundreds of other customers - to a nearby solar development, which supplies your home with solar power.

Community solar projects can be an alternative to putting solar panels on your roof, which isn't feasible for roughly 50% to 75% of Americans for a number of reasons, such as that they live in an apartment building.

There are community solar projects in 40 states, in addition to Washington, DC, according to the Solar Energy Industries Association, and at least 19 states have policies or programs that support these projects.

How much can Arcadia save you?

While Arcadia is known as a clean-energy platform, Bhatraju says "the vast majority" of its customers join in pursuit of energy savings, predictability, and the ability to pay automatically by credit card.

A company spokesperson said that customers enrolled in Arcadia's Smart Rate program have saved an average of 20% on their power bills, and Bhatraju told Business Insider last year that savings could come in as high as 40%.

The startup didn't share information on the savings associated with its community solar program.

"There's no long-term contract, there are no credit checks," Bhatraju says. "If you pay a power bill and you pay it on time, you can get access to clean energy. And I think that is a radical idea. Clean energy has been a rich person's product."

In the year ahead, Arcadia also has plans to enter the home-efficiency industry by offering financing programs for smart thermostats and other devices, such as batteries, that help consumers use less energy.

A "fundamental paradigm shift" is reshaping the way consumers think about energy, Reddy of EIP said last year. Soon, energy will be like any other product for sale - and Arcadia is among the startups ushering in that era.

• Read more:
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