Demand for photo voltaic vitality in power-starved Nigeria has soared within the final decade due to worsening grid reliability and rising gas prices. That’s drawn investor curiosity to Arnergy, a cleantech startup assembly that want. The corporate simply raised a $15 million Sequence B extension (on prime of a $3 million B1 round final yr), bringing its whole for the spherical to $18 million.
That surge in demand for photo voltaic methods follows vital coverage shifts, most notably the removal of Nigeria’s decades-old fuel subsidy in Could 2023 (the federal government’s choice—lengthy debated—ended its observe of masking the hole between world and native gas costs).
Since then, petrol costs have jumped practically 500%, making energy turbines, as soon as seen because the extra inexpensive various to unreliable grid energy and photo voltaic methods regardless of environmental hazards, far costlier to run.
Arnergy’s pitch has modified with the instances. “After we began the enterprise, we used to place photo voltaic as a technique to get uninterrupted energy, not essentially to economize. It wasn’t a part of a business dialog,” founder and CEO Femi Adeyemo advised TechCrunch. “Now it’s, as a result of we are able to clearly present prospects how our methods save them month-to-month whether or not utilizing petrol, diesel, and even the grid.”
Adeyemo launched Arnergy in 2013 to offer photo voltaic methods to properties and companies throughout sectors like hospitality, training, finance, agriculture, and healthcare.
What started as a resilience play is now a cost-savings technique altering the economics of adoption for the cleantech backed by Bill Gates’s Breakthrough Energy Ventures (the agency led Arnergy’s $9 million Series A in 2019.)
Lease-to-own growing adoption
That adoption is clearest within the firm’s lease-to-own product, Z Lite, which grew to become a core focus following Arnergy’s first Series B tranche final yr.
Whereas outright purchases comprised 60% to 70% of income in 2023, they accounted for simply 25% of gross sales final yr. However, lease-to-own, the place prospects pay fastened month-to-month charges over 5 to 10 years earlier than proudly owning the system, has gained extra traction.
One motive for this modification is affordability when in comparison with electrical energy tariffs. Till lately, many individuals considered long-term leases as costlier than operating diesel or petrol turbines. However with diesel costs hovering post-subsidy elimination and grid tariffs climbing—particularly after a brand new authorities coverage final April that tripled electricity consumption costs for customers with the most stable power—lease-to-own photo voltaic is turning into in style amongst prospects, says Adeyemo.
“Think about paying ₦200,000 (~$125) each month for energy. With our product, that drops to ₦96,000 (~$60). Over 5 years, it’s a no brainer what you’ll save,” mentioned the CEO. He added that many present prospects are returning to double their photo voltaic capability or change utterly off-grid because of this.
Arnergy tripled its lease buyer base between 2023 and 2024 and expects to develop it 4–5x this yr. Naira revenues have climbed accordingly and are on observe to quadruple by the tip of the yr.
Greenback revenues, alternatively, have remained flat attributable to foreign money devaluation, however Adeyemo mentioned the corporate is constructing FX income by way of dollar-denominated B2B2C partnerships and potential enlargement into Francophone Africa.
Scaling amidst one more authorities coverage
To this point, Arnergy has deployed over 1,800 methods throughout 35 Nigerian states, totaling 9MWp of photo voltaic and 23MWh of battery storage.
Arnergy plans to make use of its new funding led Nigerian personal fairness agency CardinalStone Capital Advisers (CCA) to put in greater than 12,000 methods by 2029. Breakthrough Power Ventures in addition to British Worldwide Funding, Norfund, EDFI MC, and All On participated within the spherical.
However hitting that focus on requires a strategic shift. For practically a decade, Arnergy dealt with gross sales in-house. Now, it’s adopting a partnership-driven mannequin with enterprise shoppers and bodily shops exterior Lagos to achieve extra prospects in Nigeria’s power-starved market.
The Lagos-based cleantech is in talks to boost extra native debt from banks and DFIs to help these tasks together with energy-as-a-service (EaaS) options for multinationals, says Adeyemo.
But as Arnergy prepares to scale, a proposed coverage may threaten its momentum.
Final month, Nigeria’s authorities announced plans to ban solar panel imports to spice up native manufacturing. The transfer has drawn backlash from stakeholders who argue that home capability is much from prepared.
Adeyemo agrees with the aim, however not the strategy. He warned {that a} untimely ban may stall an business that’s solely simply getting off the bottom.
Based on the CEO, Nigeria must create an surroundings with the fitting infrastructure, coverage stability, and entry to capital in order that native factories can ramp up over the following 3 to five years. Solely after that ought to the nation begin enthusiastic about phasing out imports.
“We’re advocates for native manufacturing. However let’s construct capability earlier than shutting the door on imports. In any other case, we threat doing extra hurt than good, each to the business and to the tens of millions of Nigerians who now depend on photo voltaic as their main vitality supply,” he remarked.