Arnergy, a Nigerian cleantech startup that offers in distributed renewable power merchandise and options, has raised $3 million in new financing. The bridge spherical was financed by All On, a Shell-backed off-grid power influence funding firm.
The financing comes 5 years after Arnergy, a supplier of solar energy methods to houses and companies, secured a $9 million Collection A spherical in 2019. All On, together with different companies, together with Invoice Gates’ Breakthrough Power Ventures, ElectriFI, and Norfund, participated as buyers within the spherical.
Based in 2013 by Femi Adeyemo and Kunle Odebunmi, Arnergy was launched as a supplier of sustainable power companies supposed to ship clear and dependable power for companies or houses. The corporate’s power methods are tailor-made to sort out intermittent and grid unreliability points, enabling residential clients and companies throughout hospitality, schooling, finance, agriculture, and healthcare to entry and set up inexpensive and dependable distributed power methods.
Earlier than its Collection A financing, Arnergy had put in over 2MW of electrical energy for greater than 2,000 purchasers. Alongside the $4 million debt financing obtained over the previous few years from each native lenders, akin to Nigeria’s Financial institution of Business, and overseas ones, the corporate’s investments have led to the deployment of over 7MW of photo voltaic PV methods and the set up of over 20MW of lithium battery power storage options (BESS).
Regardless of the strides made, vital challenges persist within the sector. Nigeria has a grid capability of 12 GW, with solely a fraction of this accessible to shoppers, that means many Nigerians nonetheless lack dependable entry to electrical energy. The bulk depend on self-generated energy by petrol or diesel mills, primarily sourced from fossil fuels, and that poses well being and environmental hazards. The latest elimination of gasoline subsidies, escalating diesel costs, and difficult macroeconomic situations underscore the pressing want for power value financial savings amongst retail and enterprise clients. Whereas photo voltaic methods are the commonest different, there stays a demand-supply hole that Arnergy goals to handle, spurred by the prevailing dynamics within the native power sector.
“I think one of the things that has been very important to Arnergy has been capital efficiency. We didn’t just want to raise for raising sake,” CEO Adeyemo stated in an interview with TechCrunch. “We were waiting for some triggers like the fuel subsidy removal, closeness to grid parity based on the price on the grid and also diesel prices to go back into the market. So the combination of all of those more or less gave us signals based on triggers we set when we last raised money.”
Adeyemo emphasizes that the Nigerian market has reached a stage the place photo voltaic electrical energy is changing into cost-competitive in comparison with grid energy. In 2019, many in Nigeria didn’t view photo voltaic methods as economically viable. Nonetheless, present worth factors for petrol, diesel, and grid electrical energy drive elevated demand for photo voltaic methods. Regardless of challenges posed by change price losses, there’s a international lower in photo voltaic panel and lithium battery costs. Adeyemo notes that lithium costs would have been considerably decrease in Nigeria with out the influence of change price fluctuations. He factors out that the associated fee per kilowatt-hour of lithium batteries was round $400 in early 2023, in comparison with $250 per kilowatt-hour at this time.
This shift in market dynamics prompted Arnergy to lift new funding for scaling up operations and alter its gross sales method. Since its inception, the corporate has derived 75% of its enterprise from outright gross sales fairly than leases. Adeyemo explains that many shoppers discovered long-term leases, the place pricing is amortized over a interval, costlier than petrol or diesel mills. Nonetheless, with the numerous enhance in diesel costs, as much as 5x greater, long-term leases now make extra financial sense than they did up to now.
“We are now bullish on leases given that cost competitiveness now makes sense. We’ve tested and tried it, and the chance of default is now lower because of the monthly expense of petrol or diesel. You can more or less switch that for solar. It wasn’t the case four years ago where you will be paying higher even if you’re on a five-year lease to own solar.”
Arnergy intends to capitalize on this pattern within the foreseeable future. Nigeria, its major market, continues to face challenges with secure electrical energy, with little chance of great enhancements within the close to time period. Moreover, it’s noteworthy that even in areas like Europe, the US, or Australia, the place the grid reliability is excessive, there’s a rising pattern in the direction of photo voltaic power adoption regardless of the elimination of rebates in sure situations.
To that finish, the ten-year-old cleantech firm, which has witnessed a 10x income progress over the past 5 years, plans to take care of its service provision throughout all 36 states the place it operates in Nigeria by min-grid builders. Moreover, Arnergy is getting ready to lift its Collection B spherical, which is scheduled to shut this quarter. The upcoming funding spherical goals to facilitate additional enlargement of its operations and speed up the adoption of its renewable power merchandise and options inside and outdoors Nigeria.
“We are proud of our partnership with Arnergy over the past years. With this partnership, we have been able to achieve some of our goals to empower communities and create a cleaner future for Nigeria,” stated Caroline Eboumbou, All On CEO, in an announcement. “Arnergy exemplifies the impact we strive to achieve at All On, innovative solutions, 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.”
