Demand for photo voltaic vitality in power-starved Nigeria has soared within the final decade because of 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 spherical final yr), bringing its whole for the spherical to $18 million.
That surge in demand for photo voltaic techniques follows important coverage shifts, most notably the removal of Nigeria’s decades-old fuel subsidy in Could 2023 (the federal government’s determination—lengthy debated—ended its apply of overlaying the hole between international and native gas costs).
Since then, petrol costs have jumped practically 500%, making energy mills, as soon as seen because the extra reasonably priced different to unreliable grid energy and photo voltaic techniques regardless of environmental hazards, far costlier to run.
Arnergy’s pitch has modified with the occasions. “After we began the enterprise, we used to place photo voltaic as a strategy to get uninterrupted energy, not essentially to save cash. It wasn’t a part of a industrial dialog,” founder and CEO Femi Adeyemo informed TechCrunch. “Now it’s, as a result of we will clearly present prospects how our techniques save them month-to-month whether or not utilizing petrol, diesel, and even the grid.”
Adeyemo launched Arnergy in 2013 to supply photo voltaic techniques to houses and companies throughout sectors like hospitality, schooling, 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 Sequence 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. Alternatively, lease-to-own, the place prospects pay mounted month-to-month charges over 5 to 10 years earlier than proudly owning the system, has gained extra traction.
One cause for this transformation is affordability when in comparison with electrical energy tariffs. Till not too long ago, many individuals considered long-term leases as costlier than operating diesel or petrol mills. 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 common 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 swap fully 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 monitor to quadruple by the tip of the yr.
Greenback revenues, then again, have remained flat as a consequence of foreign money devaluation, however Adeyemo mentioned the corporate is constructing FX income via dollar-denominated B2B2C partnerships and potential enlargement into Francophone Africa.
Scaling amidst one more authorities coverage
Up to now, Arnergy has deployed over 1,800 techniques 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 non-public fairness agency CardinalStone Capital Advisers (CCA) to put in greater than 12,000 techniques 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 purchasers and bodily stores outdoors Lagos to achieve extra prospects in Nigeria’s power-starved market.
The Lagos-based cleantech is in talks to lift further native debt from banks and DFIs to help these initiatives 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 purpose, however not the method. He warned {that a} untimely ban may stall an trade that’s solely simply getting off the bottom.
In accordance with the CEO, Nigeria must create an setting with the fitting infrastructure, coverage stability, and entry to capital in order that native factories can ramp up over the subsequent 3 to five years. Solely after that ought to the nation begin desirous 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 trade and to the hundreds of thousands of Nigerians who now depend on photo voltaic as their major vitality supply,” he remarked.