The demand for solar energy in Nigeria has increased significantly over the past decade due to the country’s unreliable grid and rising fuel costs. This has led to a surge in investor interest in Arnergy, a cleantech startup that provides solar power systems to homes and businesses. The company has recently raised $15 million in a Series B extension, bringing its total funding for the round to $18 million.

The increase in demand for solar systems can be attributed to the significant policy shifts in the country, particularly the removal of the decades-old fuel subsidy in May 2023. This decision has led to a nearly 500% increase in petrol prices, making power generators, which were once seen as a more affordable alternative to unreliable grid power and solar systems, far costlier to run.

As a result, Arnergy’s pitch has changed to focus on the cost savings of its solar systems. According to founder and CEO Femi Adeyemo, the company can now clearly show customers how its systems can save them money on a monthly basis, whether they are using petrol, diesel, or the grid.

Adeyemo launched Arnergy in 2013 to provide solar systems to homes and businesses across various sectors. The company’s initial focus was on providing uninterrupted power, but it has now shifted to a cost-savings strategy, which is changing the economics of adoption for the cleantech.

Arnergy is backed by Bill Gates’s Breakthrough Energy Ventures, which led the company’s $9 million Series A in 2019. The company’s lease-to-own product, Z Lite, has become a core focus and has gained significant traction, with customers paying fixed monthly fees over 5 to 10 years before owning the system.

Lease-to-Own Increasing Adoption

The adoption of Arnergy’s lease-to-own product is increasing, with outright purchases comprising only 25% of sales last year, down from 60% to 70% in 2023. The company’s lease-to-own product has become more popular due to its affordability compared to electricity tariffs and the rising cost of diesel and petrol.

According to Adeyemo, the company’s lease-to-own product can save customers a significant amount of money, with one example showing a customer saving ₦104,000 (~$65) per month. The company has tripled its lease customer base between 2023 and 2024 and expects to grow it 4-5x this year.

Arnergy’s naira revenues have climbed accordingly and are on track to quadruple by the end of the year. However, dollar revenues have remained flat due to currency devaluation, but the company is building FX revenue through dollar-denominated B2B2C partnerships and potential expansion into Francophone Africa.

Scaling Amidst Yet Another Government Policy

Arnergy has deployed over 1,800 systems across 35 Nigerian states, totaling 9MWp of solar and 23MWh of battery storage. The company plans to use its new funding to install more than 12,000 systems by 2029, with the goal of reaching more customers in Nigeria’s power-starved market.

To achieve this goal, Arnergy is adopting a partnership-driven model with business clients and physical retail outlets outside Lagos. The company is also in talks to raise additional local debt from banks and DFIs to support these projects, including energy-as-a-service (EaaS) solutions for multinationals.

However, a proposed policy could threaten Arnergy’s momentum. The Nigerian government has announced plans to ban solar panel imports to boost local manufacturing, which has drawn backlash from stakeholders who argue that domestic capacity is far from ready.

Adeyemo agrees with the goal of local manufacturing but not the approach. He warned that a premature ban could stall an industry that’s only just getting off the ground and advocated for creating an environment with the right infrastructure, policy stability, and access to capital to allow local factories to ramp up over the next 3 to 5 years.