Nigeria’s Solar Energy Surge: Arnergy’s Rise in a Changing Market
The demand for solar energy in Nigeria has accelerated dramatically over the past decade, primarily due to deteriorating grid reliability and increasing fuel prices. This rise in demand has captured the attention of investors, leading to increased funding for companies such as Arnergy, a cleantech startup that is addressing these energy challenges. Recently, Arnergy secured a $15 million extension to its Series B funding round, bringing the total raised for this round to $18 million, following a previous $3 million round in 2022.
Policy Shifts and Market Dynamics
The significant increase in solar adoption can be linked to pivotal policy changes, particularly the removal of a long-standing fuel subsidy in May 2023. This decision, which had been debated for years, ended the government’s practice of balancing discrepancies between global and local fuel prices.
Since the subsidy was lifted, fuel costs have surged by nearly 500%, making traditional power generators—once considered a cost-effective alternative to the unreliable grid—far less affordable. In this context, Arnergy has revised its market strategy, emphasizing the financial benefits of solar energy. “When we started the business, we used to position solar as a way to get uninterrupted power, not necessarily to save money. Now it is a commercial conversation,” stated Femi Adeyemo, founder and CEO of Arnergy.
Solar Solutions for Diverse Sectors
Founded in 2013, Arnergy aims to provide solar systems to a range of sectors, including hospitality, education, finance, agriculture, and healthcare. What was once a focus on resilience has evolved into a compelling cost-saving solution, making solar more attractive amid the changing economic landscape.
Innovative Financing: Lease-to-Own Options
One of the most significant innovations in Arnergy’s offerings is its lease-to-own product, Z Lite. The focus on this financing model has grown, particularly after the company’s first Series B tranche in 2022. In 2023, outright purchases represented 60-70% of revenue, a stark contrast to just 25% the previous year. The lease-to-own option allows customers to pay fixed monthly fees over a period of 5 to 10 years before owning the system. This model has gained popularity as the cost of electricity tariffs has escalated.
CEO Adeyemo highlighted the advantages of lease-to-own, stating, “Imagine paying ₦200,000 (~$125) every month for power. With our product, that drops to ₦96,000 (~$60). Over five years, it’s a no-brainer what you’ll save.” As a result of these dynamics, Arnergy has seen its lease customer base triple from 2023 to 2024, with expectations to grow another 4-5 times this year. Additionally, revenues in Naira are projected to quadruple by year-end.
Future Growth and Strategic Shifts
Arnergy has already deployed more than 1,800 systems across 35 Nigerian states, aggregating 9 MWp of solar power and 23 MWh of battery storage. With its new funding round, led by Nigerian private equity firm CardinalStone Capital Advisers (CCA), Arnergy plans to install over 12,000 systems by 2029, backed by participation from notable investors including Bill Gates’s Breakthrough Energy Ventures.
To meet this ambitious target, the company is shifting from an in-house sales model to a partnership-driven approach, collaborating with business clients and distributing products through retail outlets outside Lagos. Adeyemo noted the need for local debt acquisition to support these initiatives, including energy-as-a-service (EaaS) solutions for larger multinationals.
Navigating Regulatory Challenges
However, Arnergy’s growth may face challenges due to recently proposed government regulations. The Nigerian government plans to ban solar panel imports to foster local manufacturing. Although aimed at increasing domestic capacity, this policy has drawn criticism from industry stakeholders who argue that local manufacturing capabilities are currently insufficient.
Adeyemo supports the intent behind local production but cautioned against premature restrictions on imports. “Let’s build capacity before shutting the door on imports. Otherwise, we risk doing more harm than good,” he emphasized, advocating for a stable policy environment and access to capital to strengthen local manufacturing over the next few years.
In summary, as Nigeria’s energy landscape evolves, companies like Arnergy are leading the charge in solar adoption, transforming economic narratives around energy consumption through innovative financing and strategic collaborations, all while navigating the complexities of regulatory changes.