Demand for photo voltaic power 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 Collection B extension (on prime of a $3 million B1 spherical final yr), bringing its complete for the spherical to $18 million.
That surge in demand for photo voltaic programs follows vital coverage shifts, most notably the elimination of Nigeria’s decades-old gas subsidy in Could 2023 (the federal government’s resolution—lengthy debated—ended its observe of overlaying the hole between international and native gas costs).
Since then, petrol costs have jumped almost 500%, making energy mills, as soon as seen because the extra inexpensive different to unreliable grid energy and photo voltaic programs 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 option to get uninterrupted energy, not essentially to economize. 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 clients how our programs save them month-to-month whether or not utilizing petrol, diesel, and even the grid.”
Adeyemo launched Arnergy in 2013 to supply photo voltaic programs to properties 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 rising 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. Alternatively, lease-to-own, the place clients pay fastened month-to-month charges over 5 to 10 years earlier than proudly owning the system, has gained extra traction.
One purpose for this transformation is affordability when in comparison with electrical energy tariffs. Till not too long ago, many individuals seen long-term leases as costlier than working 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 electrical energy consumption prices for purchasers with probably the most secure energy—lease-to-own photo voltaic is changing into standard amongst clients, 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,” stated the CEO. He added that many current clients are returning to double their photo voltaic capability or swap 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 monitor to quadruple by the top of the yr.
Greenback revenues, then again, have remained flat resulting from forex devaluation, however Adeyemo stated the corporate is constructing FX income by dollar-denominated B2B2C partnerships and potential growth into Francophone Africa.
Scaling amidst yet one more authorities coverage
To this point, Arnergy has deployed over 1,800 programs 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 programs by 2029. Breakthrough Vitality 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 almost 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 succeed in extra clients 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 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 much from prepared.
Adeyemo agrees with the aim, however not the method. He warned {that a} untimely ban may stall an business that’s solely simply getting off the bottom.
In line with the CEO, Nigeria must create an surroundings with the proper 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 fascinated with 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 business and to the thousands and thousands of Nigerians who now depend on photo voltaic as their major power supply,” he remarked.
