It’s Tuesday, and today we’re focusing on Niko Energy, a solar startup from Mexico that recently raised an $8 million equity round. The round was led by QED Investors, with participation from 468 Capital and Picus Capital. Niko also raised $15 million in debt.
The Product
Niko provides end-to-end solar solutions for homes and businesses in Mexico, handling financing, installation, and system management.
If the customer wants to get themselves some panels, their journey will look like this:
Quote Request: The customer sends Niko their utility bill, and the company provides a preliminary project cost.
Customer Visit: Niko visits the property, shoots it with drones to get a more accurate picture.
Design: Using AI, Niko analyzes the customer’s energy consumption and solar incidence on the roof with satellite technology and LiDAR. That provides accurate data on available sunlight. Then, their system generates an optimal solar design.
Installation: Installation takes 3 to 4 weeks, and interconnection procedures with the Federal Electricity Commission (CFE) last 4 to 6 weeks.
Usage: After the system goes live, the customer can monitor how much energy is produced and consumed through the app.
That’s how the customer gets the main product — solar panels. But Niko has a few complementary products.
First, batteries. Like most solar system providers, Niko offers batteries for backup power. They store energy generated by solar panels or during periods of low electricity cost. When there’s a blackout or electricity prices spike, customers shift to battery power. Second, NikoCare. It’s Niko’s subscription service, covering 24/7 monitoring, maintenance, and cleaning.
Now, Niko’s moving into a new category — virtual power plants (VPPs). A VPP is basically a power plant without the plant — just a bunch of small, scattered energy sources working together like a team. Instead of one big, central facility generating electricity, a VPP connects things like rooftop solar panels, home batteries, wind farms, and even electric vehicles, then manages them as a single unit using software. The software tells different energy sources when to store power, when to send it to the grid, and when to hold back to keep things balanced.
That’s in theory. How it will work in practice with Niko — well, the details are still unknown.
The Business Model
Niko runs three different pricing models, each with its own trade-offs. The faster you pay, the more you save—but there’s flexibility depending on what works best for you.
One-time cash payment: The biggest upfront investment but also the biggest savings—up to 98% off your bills. You’ll break even in about three years.
12-month no-interest plan: Same savings as the cash option but spread out over a year with no downpayment.
Subscription (12–84 months): A fixed yearly payment with savings of up to 50% during the subscription period. Plus, subscribers get NikoCare. At the end of the term, the customer owns the panels outright.
In short: Pay more upfront, save more on bills. Pay over time, spread out the cost. Regardless, over a 25-year period, cumulative savings are in the tens of thousands of dollars.
Since solar panels cost $7,000–$10,000, 50% of customers prefer to spread their expenses and go for the subscription option. Another 30% opt for the 12-month plan, while 20% pay upfront. Importantly, even if you don’t choose the subscription option, you can still subscribe separately to NikoCare for maintenance.
The Local Angle
While solar is a hot topic worldwide, few countries have as much untapped potential as Mexico:
Untapped Resource: Solar PV produces just 5.1% of Mexico’s electricity. Germany generates 3.3 times more solar power, despite having 5.5 times less territory and 4.4 times less radiation. But Mexico can do much better. Just 0.1% of its land would need to be covered with solar panels to generate 100% of its electricity demand — 10 times less than in France.
Government Action and Inaction: Mexico’s government has been inconsistent in regulating and promoting solar. The 2015 Energy Transition Law targeted 35% renewables, but when President López Obrador took office, many solar-supporting measures were rolled back in favor of natural gas. The 2019 cancellation of ‘long-term electricity auctions’ — a key clean energy tool — didn’t help. In 2021, fossil fuels received 9x more funding than renewables. Mexico’s new president, Claudia Sheinbaum, seems more pro-climate, but we’ll see what actually happens.
Blackouts. Extreme heat and climate calamities like windstorms lead to periodic rolling blackouts or local outages—either because the grid lacks capacity or power lines get damaged. One major blackout last year hit 20 of Mexico’s 30 states when net power demand reached 44.9 GW, just shy of the 45.0 GW generated. And while you can’t use Niko during a blackout for security reasons, a more decentralized grid would improve resiliency.
The Roadblocks
Attacking such a large market is a fascinating endeavour. But it also feels like a hard one for two large reasons and a bunch of smaller ones:
Financing: Niko’s business model carries significant financing risk. The company makes large upfront investments in purchasing panels for customers but recoups that investment in smaller increments, with only 20% of customers opting to buy panels outright. As Niko grows, it will need to raise more capital to finance future customers. Additionally, its debt is in pesos—good for repayments but risky for purchasing solar panels if the peso depreciates. I assume the biggest leverage point is reducing panel costs, but that only comes with scale. And a continued decline in solar panel costs wouldn’t hurt either.
Continued Policy Uncertainty: Mexico still relies heavily on gas, and renewables aren’t the government’s top priority. Increased government control over the grid could make things trickier—especially as Niko expands into virtual power plants and working with larger customers.
Other Smaller Risks: I think financing and policy are the two main factors, but there are others—like the supply chain. As with any solar provider, with China producing 80% of the world’s solar panels, there’s an overreliance—not necessarily on one supplier, but on one country. Global trade has seen better days, so how the current trade battles between the U.S. and the world shake out might affect relations between other country pairs. Competition is always a factor, but the market seems so nascent that there’s room for everyone. Customers in Mexico tend to take their time making decisions, which makes it harder to predict sales and, more importantly, expenses.
The Takeaway
It feels like running such a financing-heavy business like Niko is so hard and stressful — so kudos to the founders, Edoardo Dellepiane and Raffaele Sertorio.
Also, while solar seems like an obvious choice for a country like Mexico, the government still prefers gas. For some reason.
