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

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Nigerian cleantech startup Arnergy, which deals in distributed renewable energy products and solutions, has raised $3 million in new financing. The Bridge round was financed by Shell-backed off-grid energy impact investment company All On.

The financing 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 participated as investors in the round, along with other firms including Bill Gates' Breakthrough Energy Ventures, ElectriFI and Norfund.

Founded in 2013 by Femi Adeyemo and Kunle Odebunmi, Arnergy was launched as a provider of sustainable energy services with the aim of providing clean and reliable energy to businesses or homes. The company's energy systems are designed to address intermittency and grid unreliability issues, enabling residential customers and businesses in hospitality, education, finance, agriculture and health care to access and install affordable and reliable distributed energy systems. makes.

Prior to its Series A financing, Arnergy had installed over 2MW of power for over 2,000 customers. With debt financing of $4 million obtained from both local lenders such as the Bank of Industry of Nigeria and foreign lenders over the past few years, the company's investments have led to the deployment of over 7MW of solar PV systems and the installation of over 20MW. Lithium Battery Energy Storage Solutions (BESS).

Despite progress, significant challenges remain in this area. Nigeria has a grid capacity of 12 GW, only a fraction of which reaches consumers, meaning many Nigerians still do not have reliable access to electricity. Most people rely on self-generated electricity through petrol or diesel generators, which is mainly derived from fossil fuels, and poses health and environmental hazards. The recent removal of fuel subsidies, rising diesel prices and challenging macroeconomic conditions have underlined the urgent need for energy cost savings among retail and business customers. While solar systems are the most common option, there remains a demand-supply gap due to the dynamics prevalent in the local energy sector which Ernergy seeks to address.

“I think one of the things that has been very important for Ernergy is capital efficiency. “We didn’t want to raise money just for the sake of raising money,” CEO Adeyemo said in an interview with TechCrunch. “We wanted to focus on the removal of fuel subsidies, proximity to grid parity based on price on the grid, and diesel prices in the market.” Like waiting for some trigger to come back. So the combination of all that gave us signals more or less based on the triggers that we had set when we last raised funds.

Adeyemo emphasizes that the Nigerian market has reached the stage where solar power is becoming cost-competitive compared to grid power. In 2019, many people in Nigeria did not consider solar systems to be economically viable. However, the current prices of petrol, diesel and grid electricity have increased the demand for solar systems. Despite challenges posed by exchange rate declines, global prices for solar panels and lithium batteries have declined. Adeyemo says lithium prices in Nigeria would have been much lower without the impact of exchange rate fluctuations. He points out that the cost per kilowatt-hour of lithium batteries in early 2023 was about $400, compared to $250 per kilowatt-hour today.

This change in market dynamics prompted Arnergy to raise new funding to expand operations and change its sales approach. Since its inception, the company has derived 75% of its business from outright sales rather than leases. Adeyemo explains that many customers found long-term leases, where pricing is amortized over a period, which are more expensive than petrol or diesel generators. However, with diesel prices increasing significantly by up to 5 times, long-term leases now make more economic sense than before.

“We are now bullish on leases, given that cost competitiveness now makes sense. We have tried and tested it, and the probability of default due to monthly expense of petrol or diesel is now reduced. You can more or less switch it to solar power. “That wasn’t the case four years ago, where you would have to pay more for solar even if you had a five-year lease.”

Arnergy intends to take advantage of this trend in the near future. Nigeria, its primary market, continues to face challenges with stagnant power, with little chance of significant improvement in the near term. Additionally, it is noteworthy that even in regions such as Europe, the US or Australia, where grid reliability is high, solar energy adoption is increasing despite the removal of rebates in some cases.

To that end, the ten-year-old cleantech company, which has seen 10-fold revenue growth in the last five years, plans to maintain its service provision in all 36 states where it operates through min-grid developers in Nigeria. Is. Additionally, Ernergy is preparing to raise its Series B round, which is scheduled to close this quarter. The upcoming funding round is aimed at facilitating further expansion of its operations and accelerating the adoption of its renewable energy products and solutions within and outside Nigeria.

“We are proud of our partnership with Arnergy over the years. With this partnership, we have been able to achieve some of our goals of empowering communities and creating a cleaner future for Nigeria,” Caroline Aboumba, CEO of All On, said in a statement. “Arnergy exemplifies the impact we strive to achieve at All On, through 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.