Demand for photo voltaic vitality in power-starved Nigeria has soared within the final decade because of worsening grid reliability and rising gasoline prices. That’s drawn investor curiosity to Arnergy, a cleantech startup assembly that want. The corporate simply raised a $15 million Collection B extension (on high of a $3 million B1 spherical final yr), bringing its complete for the spherical to $18 million.
That surge in demand for photo voltaic techniques follows vital coverage shifts, most notably the removing of Nigeria’s decades-old gasoline subsidy in Might 2023 (the federal government’s determination—lengthy debated—ended its follow of protecting the hole between world and native gasoline 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. “Once we began the enterprise, we used to place photo voltaic as a approach to get uninterrupted energy, not essentially to save cash. It wasn’t a part of a industrial dialog,” founder and CEO Femi Adeyemo instructed TechCrunch. “Now it’s, as a result of we are able to 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 offer 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 Invoice Gates’s Breakthrough Vitality Ventures (the agency led Arnergy’s $9 million Collection A in 2019.)
Lease-to-own growing adoption
That adoption is clearest within the firm’s lease-to-own product, Z Lite, which turned a core focus following Arnergy’s first Collection 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 mounted month-to-month charges over 5 to 10 years earlier than proudly owning the system, has gained extra traction.
One cause for this variation is affordability when in comparison with electrical energy tariffs. Till lately, many individuals considered long-term leases as costlier than operating diesel or petrol mills. However with diesel costs hovering post-subsidy removing and grid tariffs climbing—particularly after a brand new authorities coverage final April that tripled electrical energy consumption prices for purchasers with probably the most secure energy—lease-to-own photo voltaic is turning into fashionable 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 fully off-grid consequently.
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, however, have remained flat attributable to foreign money devaluation, however Adeyemo mentioned the corporate is constructing FX income via dollar-denominated B2B2C partnerships and potential growth 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 Vitality Ventures in addition to British Worldwide Funding, Norfund, EDFI MC, and All On participated within the spherical.
However hitting that concentrate 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 exterior Lagos to achieve extra prospects in Nigeria’s power-starved market.
The Lagos-based cleantech is in talks to lift extra native debt from banks and DFIs to assist these initiatives together with energy-as-a-service (EaaS) options for multinationals, says Adeyemo.
But as Arnergy prepares to scale, a proposed coverage might threaten its momentum.
Final month, Nigeria’s authorities introduced plans to ban photo voltaic panel imports to spice up native manufacturing. The transfer has drawn backlash from stakeholders who argue that home capability is way from prepared.
Adeyemo agrees with the objective, however not the strategy. He warned {that a} untimely ban might stall an trade that’s solely simply getting off the bottom.
In response to the CEO, Nigeria must create an atmosphere with the correct 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 danger doing extra hurt than good, each to the trade and to the tens of millions of Nigerians who now depend on photo voltaic as their major vitality supply,” he remarked.
