Arnergy, which provides solar energy systems to homes and businesses in Nigeria, raises $3 million

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Arnergie, a Nigerian cleantech startup that offers distributed renewable energy products and solutions, has raised $3 million in new funding. The bridge project was funded by All On, an off-grid energy impact investment company backed by Shell.

The funding comes five years after Arnergy, a provider of solar energy systems for homes and businesses, secured a $9 million Series A round in 2019. All On, alongside others Companies including Bill Gates’ Breakthrough Energy Ventures, ElectriFI and Norfund participated as investors in the round.

Founded in 2013 by Femi Adeyemo and Kunle Odebunmi, Arnergy was launched as a sustainable energy service provider aimed at providing clean and reliable energy to businesses or homes. The company’s energy systems are designed to solve intermittent and unreliable grid issues, enabling residential customers and businesses in the hospitality, education, financial, agricultural and health to access and install reliable and affordable distributed energy systems.

Prior to its Series A funding, Arnergy had installed more than 2 MW of electricity for more than 2,000 customers. Alongside $4 million in debt financing secured over the past few years from local lenders, such as the Bank of Industry of Nigeria, and foreign lenders, the company’s investments have led to the deployment of over 7 MW of systems solar photovoltaic systems and the installation of more than 20 MW of solar photovoltaic systems. lithium battery energy storage (BESS) solutions.

Despite the progress made, significant challenges persist in the sector. Nigeria has 12 GW of grid capacity, only a fraction of which is accessible to consumers, meaning many Nigerians still lack reliable access to electricity. The majority of them rely on self-generated energy through gasoline or diesel generators, mainly from fossil fuels, which poses health and environmental risks. The recent removal of fuel subsidies, rising diesel prices and challenging macroeconomic conditions highlight the urgent need to achieve savings on energy costs for home and business customers. Although solar systems are the most common alternative, there remains a gap between supply and demand that Arnergy aims to fill, driven by the prevailing dynamics of the local energy sector.

“I think one of the things that has been very important for Arnergy has been capital efficiency. We didn’t just want to increase for the sake of it,” CEO Adeyemo said in an interview with TechCrunch. “We were waiting for certain triggers like removal of fuel subsidies, approximation of grid parity based on grid price and also diesel prices to come back into the market. So the combination of all of this more or less gave us signals based on the triggers that we set in our last fundraising.

Adeyemo points out that the Nigerian market has reached a stage where solar electricity is becoming competitive with grid electricity. In 2019, many Nigerians did not view solar systems as economically viable. However, current prices for gasoline, diesel and grid electricity are driving increased demand for solar systems. Despite the challenges posed by foreign exchange losses, there is a global decline in the prices of solar panels and lithium batteries. Adeyemo notes that lithium prices would have been significantly lower in Nigeria without the impact of exchange rate fluctuations. He points out that the cost per kilowatt hour of lithium batteries was around $400 at the start of 2023, compared to $250 per kilowatt hour today.

This change in market dynamics prompted Arnergy to raise new funds to expand its operations and change its business approach. Since its creation, the company has generated 75% of its activity through sales rather than rentals. Adeyemo says many customers find long-term leases, where prices are amortized over a period, more expensive than gasoline or diesel generators. However, with diesel prices increasing significantly, up to 5 times higher, long-term rentals are now more profitable than in the past.

“We are now optimistic on leases as cost competitiveness now makes sense. We have tested and tried it, and the risk of default is now lower due to the monthly expense on gasoline or diesel. You can more or less replace that with solar. That wasn’t the case four years ago, where you paid more even if you got a five-year lease to own solar.

Arnergy intends to capitalize on this trend in the near future. Nigeria, its main market, continues to face challenges related to electricity stability, with little chance of significant improvement in the short term. Furthermore, it should be noted that even in regions like Europe, the United States or Australia, where grid reliability is high, there is an increasing trend towards the adoption of solar energy despite the removal of discounts in certain cases.

To this end, the ten-year-old clean technology company, which has seen a 10-fold increase in revenue over the past five years, plans to maintain its service delivery in the 36 states where it operates in Nigeria by through mini-grid developers. Additionally, Arnergy is preparing to raise its Series B round, which is expected to close this quarter. The next round of funding aims to facilitate the expansion of its operations and accelerate the adoption of its renewable energy products and solutions in and outside Nigeria.

“We are proud of our partnership with Arnergy over the past few years. Through this partnership, we have been able to achieve some of our goals to empower communities and create a cleaner future for Nigeria,” Caroline Eboumbou, CEO of All On, said in a statement. “Arnergy exemplifies the impact we strive to achieve at All On, innovative solutions, an unwavering commitment to sustainability and a relentless focus on social impact. This investment reaffirms our confidence in their ability to scale their operations and accelerate the adoption of clean energy in Nigeria and beyond.

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