Power-hungry Nigeria’s solar energy demand has skyrocketed over the past decade due to rising grid reliability and fuel costs. It has attracted investors’ interest in Arnergy, a cleantech startup that meets its need. The company just raised a $15 million Series B expansion (in addition to the $3 million B1 round last year), bringing it to $18 million in total.
The surge in solar system demand continues with significant policy changes. Most notably, Nigeria’s decades-old fuel subsidies removed in May 2023 (the government’s decision is debated, but it has thwarted practices covering the global and local fuel price gaps).
Since then, gasoline prices have jumped nearly 500%, creating generators that have been considered an unreliable grid power and a more affordable alternative to solar systems despite environmental hazards.
The pitch of Arnergy has changed over time. “When we started our business, we positioned solar as a way of gaining uninterrupted power, not necessarily to save money. It wasn’t part of the commercial conversation,” founder and CEO Femi Adeyemo told TechCrunch. “Now, we can clearly show our customers how to save on a system each month, whether using gasoline, diesel or even grids.”
Adeyemo launched Arnergy in 2013, providing the solar system to housing and businesses in sectors such as hospitality, education, finance, agriculture and healthcare.
What began as a play of resilience is a cost-cutting strategy that will change the economics of adopting Cleantech, now backed by Bill Gates’ groundbreaking energy venture (he led Arnergy’s $9 million series in 2019).
Lease increase in recruitment
Its adoption is most clearly seen in Z Lite, the company’s core-focused leasing product, following Arnergy’s first series B Tranche last year.
It consisted of 60-70% of revenue in 2023, but accounted for just 25% of last year’s revenue. Meanwhile, leases to leases that pay a fixed monthly fee for over 5-10 years before customers own the system have gained more traction.
One reason for this change is its affordability compared to electricity bills. Until recently, many people viewed long-term leases as more expensive than running diesel or gasoline generators. However, after the price of diesel has risen, renters are becoming popular among clients, especially as the removal of sub-sidy and grid tariff climbing – especially after a new government policy last April, with the power consumption costs tripling for customers with the most stable power.
“Imagine paying 200,000 (~$125) per month for power. With our products, it drops to 96,000 (~$60). He added that as a result, many existing customers are coming back to double their solar capacity or switch completely off-grid.
Arnergy triples its leasing customer base between 2023 and 2024, and expects it to grow 4-5 times this year. Naira’s revenues have risen accordingly, and are quadrupled by the end of the year.
Meanwhile, dollar revenues remain flat due to currency devaluation, but Adeyemo said the company is making Forex revenues through dollar-denominated B2B2C partnerships and potential expansion into French-speaking Africa.
It expands within yet another government policy
So far, Arnergy has deployed over 1,800 systems in 35 Nigeria states, totaling 9MWP of solar and 23MWH of battery storage.
Arnergy plans to install more than 12,000 systems by 2029, using new funds to install more than 12,000 systems by 2029.
However, achieving that goal requires a strategic shift. For about 10 years, Arnergy handled sales in-house. Currently, we employ a partnership-driven model with business clients and physical retailers outside Lagos to reach more customers in a Nigerian power-based market.
Lagos-based CleanTech is in discussions to raise additional local debt from banks and DFIs to support these projects, including Services as Energy (EAAS) solutions for multinationals, Adeyemo says.
However, as Arnagy prepares to expand, the proposed policy could threaten its momentum.
Last month, the Nigerian government announced plans to ban the import of solar panels to boost local manufacturing. The move has elicited a backlash from stakeholders who argued that domestic capabilities were not ready.
Adeyemo agrees with the goal, but not the approach. He warned that a premature ban could hinder the industry, which has just come down from the ground.
According to the CEO, Nigeria will need to create an environment with appropriate infrastructure, policy stability and access to capital, allowing local factories to increase over the next 3-5 years. Only after that should countries start thinking about phased out imports.
“We are defending local manufacturing, but let’s build capacity before we close the doors for imports. Otherwise, we risk doing more harm than good for the industry and millions of Nigerians who rely on solar as our main energy source,” he said.
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