The demand for solar energy in Nigeria, which has been grappling with power shortages, has significantly increased over the past decade due to deteriorating grid reliability and rising fuel prices. This has attracted attention from investors towards Arnergy, a clean technology startup that aims to address this demand. The company has recently secured a $15 million Series B extension, adding to a previous $3 million B1 round last year, bringing the total funding for this round to $18 million.
This surge in demand for solar energy solutions has been influenced by major policy changes, particularly the government’s abolition of a long-standing fuel subsidy in May 2023, a decision that ended the government’s practice of bridging the gap between international and local fuel prices. Following this policy shift, gasoline prices have skyrocketed by nearly 500%, making traditional power generators, which were previously seen as a more economical alternative to both the unreliable grid and solar energy, significantly more expensive to operate.
Femi Adeyemo, the founder and CEO of Arnergy, explained that the company’s messaging has evolved with changing circumstances. “Initially, we marketed solar as a means to achieve uninterrupted power supply rather than as a cost-saving solution. Financial savings didn’t feature in our discussions,” he shared with TechCrunch. “Now, however, we can present a compelling case to customers demonstrating how our systems reduce their monthly energy costs whether they are using petrol, diesel, or relying on the grid.”
Launched in 2013, Arnergy set out to supply solar energy systems to various sectors including hospitality, education, finance, agriculture, and healthcare. What started as a strategy for resilience has transformed into a cost-effective approach that alters the dynamics of cleantech adoption, with backing from Bill Gates’s Breakthrough Energy Ventures, which led a $9 million Series A investment in 2019.
In particular, the company’s lease-to-own program, Z Lite, has gained traction as a key offering following the initial Series B funding. In 2023, outright purchases made up 60% to 70% of revenues, but only accounted for 25% of sales last year. Conversely, the lease-to-own model, where customers pay fixed monthly fees for 5 to 10 years before owning the system, has seen increased interest.
This shift can be attributed to the affordability of solar energy compared to electricity tariffs. Previously, many consumers perceived long-term leases as more expensive than fueling diesel or petrol generators. However, with the rise in diesel prices after the subsidy removal and increasing grid tariffs—especially following a new government policy in April that tripled electricity costs for the most stable power consumers—more customers are turning to lease-to-own solar solutions, according to Adeyemo.
He illustrated the savings clearly: “Imagine paying ₦200,000 ($125) monthly for power. Our product reduces that to ₦96,000 ($60). Over five years, the savings are significant.” He noted that many existing clients are opting to increase their solar capacity or shift entirely to off-grid solutions.
Arnergy has seen its lease customer base triple between 2023 and 2024 and anticipates a 4–5x growth in the coming year. Revenue in Naira has also increased and is on track to quadruple by year-end. However, dollar revenues have remained stable due to currency devaluation. Adeyemo mentioned that the company is working on generating foreign exchange revenue through dollar-denominated B2B2C partnerships and potential expansion into Francophone Africa.
To date, Arnergy has installed over 1,800 systems across 35 Nigerian states, generating a total of 9MWp of solar power and 23MWh of battery storage. The recent funding led by Nigerian private equity firm CardinalStone Capital Advisers (CCA) is aimed at enabling the installation of over 12,000 systems by 2029. The round also includes participation from Breakthrough Energy Ventures, British International Investment, Norfund, EDFI MC, and All On.
However, achieving these targets requires a strategic pivot. For almost a decade, Arnergy managed its sales internally, but it is now shifting to a partnership-based strategy with business clients and retail outlets outside Lagos to extend its reach within Nigeria’s energy-challenged market. Adeyemo indicated that the company is exploring local debt options from banks and development finance institutions to fund projects, including energy-as-a-service (EaaS) solutions for multinational corporations.
Yet the company’s growth could be jeopardized by a proposed government policy to ban solar panel imports in an effort to enhance local manufacturing. This proposal has faced criticism from stakeholders who contend that domestic production capabilities are insufficient at present.
Adeyemo supports the objective but disagrees with the method. He cautioned that an early ban could hinder an industry that is just beginning to flourish. According to him, Nigeria needs to foster an environment conducive to infrastructure development, policy consistency, and capital access to allow local factories to scale up over the next 3 to 5 years before considering phasing out imports.
“We advocate for local manufacturing, but we must build capacity first before closing the door on imports. Otherwise, we risk causing more harm than good, both to the industry and the millions of Nigerians who currently depend on solar energy as their primary power source,” he emphasized.
