Redwood Materials Powers AI Data Centers with Repurposed EV Batteries, Unveiling New Energy Storage Business
In the quiet, expansive landscape of the Nevada desert, a remarkable sight is taking shape — one that marries the burgeoning world of artificial intelligence with the critical need for sustainable energy solutions. Tucked discreetly between two large structures, an array of 805 retired electric vehicle (EV) batteries sits in neat rows, each encased in a simple white tarp. To the casual observer, it might appear unassuming, but this formation represents something significant: the largest microgrid in North America, powering a 2,000 GPU modular data center for AI infrastructure company Crusoe.
This pioneering project is the initial showcase for Redwood Energy, the newly launched energy storage business from Redwood Materials. Founded by JB Straubel, the former CTO and current board member of Tesla, Redwood Materials has long been focused on creating a circular supply chain for battery components through recycling. With Redwood Energy, Straubel and his team are now adding a crucial intermediate step: repurposing EV batteries that still have significant life left for stationary energy storage applications before they are ultimately recycled.
A Strategic Pivot: Leveraging a Growing Inventory
Redwood Materials has established itself as a powerhouse in battery collection and recycling. The company reports recovering more than 70% of all used or discarded battery packs in North America. This massive collection effort means they process over 20 GWh of batteries annually, equivalent to the batteries found in 250,000 EVs. This scale has led to a substantial inventory of batteries that are no longer suitable for the demanding requirements of electric vehicles but retain ample capacity for less strenuous applications like grid-scale energy storage.
Currently, Redwood holds more than 1 gigawatt-hour (GWh) worth of these batteries in inventory, with an additional 4 GWh expected in the coming months. Recognizing the immense potential of this stockpile, Redwood Energy was conceived to deploy these batteries into profitable, high-impact applications. The company has set an ambitious target: to deploy 20 GWh of grid-scale storage by 2028, aiming to become the largest repurposer of used EV battery packs globally.
The launch of Redwood Energy was marked by an event at Redwood's Sparks, Nevada facility. The demonstration itself underscored the capabilities of the new venture — everything from the event's music and screen projections to a laser light show navigating the rows of batteries was powered by the microgrid. This wasn't just a proof-of-concept; Straubel emphasized that the microgrid setup with Crusoe is a fully operational, revenue-generating project that was constructed in just four months and is already profitable. He indicated that more such deployments are planned with other customers this year.
“We wanted to go all in,” Straubel remarked, highlighting the company's commitment. He added, “I think this has the potential to grow faster than the core recycling business.”
The Nevada Microgrid: A Blueprint for Sustainable Power
The partnership with Crusoe, a startup Straubel invested in back in 2021, provides a compelling initial use case. The microgrid utilizes the retired EV batteries to store energy generated from an adjacent solar array. This system boasts a power output of 12 MW and a substantial capacity of 63 MWh. The stored energy is then dispatched to power Crusoe's modular data center, which houses 2,000 GPUs — processors known for their significant power consumption, particularly in AI and high-performance computing tasks.
Crusoe is known for its innovative approach to powering energy-intensive computing, including its large-scale data center campus in Abilene, Texas, which was the initial site for the Stargate project. Partnering with Redwood Energy allows Crusoe to secure a reliable, sustainable power source for its operations, addressing one of the most significant challenges facing the rapidly expanding AI industry: its enormous and growing energy footprint.
Colin Campbell, Redwood's CTO, highlighted the practical appeal of the solution during a tour of the microgrid. “There’s no green intent required here,” he stated. “It’s a good economic choice that also happens to be carbon-free.” This underscores the dual benefit of repurposing: it offers a cost-effective energy storage solution while simultaneously contributing to decarbonization efforts.
Addressing the Energy Demands of the AI Boom
The rise of artificial intelligence is creating unprecedented demand for computing power, and consequently, for energy. Training and running large language models and other complex AI applications require vast data centers equipped with thousands of powerful GPUs, consuming megawatts of electricity. Traditional grid infrastructure can struggle to meet this demand, and relying solely on fossil fuels contradicts global sustainability goals.
Repurposed EV batteries offer a compelling solution. While a battery might no longer meet the range or performance requirements for an electric vehicle after several years of use, it can still retain 70-80% of its original capacity. This remaining capacity is perfectly adequate for stationary energy storage applications, where the demands are less dynamic than in a vehicle. These batteries can store intermittent renewable energy from sources like solar and wind, providing a stable and reliable power supply to data centers, whether they are connected to the grid or operating as part of a microgrid.
The economic viability of using second-life batteries is a key advantage. Acquiring and deploying repurposed batteries is often significantly less expensive than manufacturing new ones for stationary storage. This cost-effectiveness, combined with the environmental benefits of extending the life of valuable battery materials, makes repurposed batteries an attractive option for energy-hungry operations like AI data centers.
The Circular Economy Vision Takes Shape
Redwood Materials was founded in 2017 with the explicit goal of closing the loop on battery production and consumption, creating a truly circular supply chain. The company initially focused on recycling manufacturing scrap from battery cell production and end-of-life consumer electronics like phones and laptops. By processing these materials, Redwood extracts valuable components such as cobalt, nickel, and lithium, which are then supplied back to battery manufacturers like Panasonic, reducing the reliance on primary mining.
Over time, Redwood has expanded its operations significantly. Beyond recycling, the company has moved into cathode production, a critical step in the battery manufacturing process. Redwood generated $200 million in revenue in 2024, largely from the sale of these recycled battery materials and components.
The company's physical footprint and partnerships have also grown. Redwood has secured deals with major automotive players like Toyota, Panasonic, and GM. It is constructing a massive South Carolina factory and made an acquisition in Europe, signaling its global ambitions for establishing a closed-loop battery ecosystem.
Redwood Energy represents the logical next step in this evolution. It leverages the company's existing infrastructure and expertise in handling large volumes of EV batteries. While the recycling market is crucial for recovering materials, the repurposing market offers an immediate opportunity to derive value from batteries that are still functional. This isn't necessarily tied to being off-grid; repurposed batteries can be integrated with solar, wind, or tied directly to the existing grid to provide stability and storage capacity.
Jessica Dunn, a battery expert at the Union of Concerned Scientists, commented on the significance of Redwood's move, telling TechCrunch, “This really demonstrates how economical the waste hierarchy actually is.” She added that seeing a large recycler like Redwood enter the repurposing market highlights “where this end-of-life market will go.”
Strategic Timing and Market Dynamics
While Redwood was founded with the long-term vision of handling a massive wave of retired EV batteries, that wave hasn't hit the market quite as quickly as some initially predicted. EV batteries are proving to be durable, often outlasting the lifespan of the vehicle itself or being covered by long warranties.
Straubel acknowledged this timing in an interview, stating, “We started really early, and in a way we started Redwood almost too early.” He explained that the company initially focused on consumer batteries and production scrap while waiting for the large volume of EV batteries to reach end-of-life.
The current recycling market primarily consists of manufacturing scrap, consumer electronics, and EV batteries that have failed under warranty. While this has been sufficient for Redwood to process over 20 GWh annually, it's a fraction of the estimated 350 GWh of batteries currently in EVs on the road today, with an additional 150 GWh expected to be added each year.
This market dynamic makes the repurposing business not just an opportunity but potentially a strategic imperative for Redwood. As Dunn pointed out, “If Redwood didn’t enter the repurposing market, then they wouldn’t get a share from the repurposed battery. They’d have to wait the five, 10, 15 years until they retired.” By entering the repurposing market now, Redwood can generate revenue and utilize its collected inventory immediately, preventing other companies from capturing this value and cutting Redwood out of years of potential income.
The scale of Redwood's operations is impressive and growing. The company operates a recycling facility at its 175-acre campus in Sparks, Nevada. In Charleston, South Carolina, it is developing a sprawling 600-acre facility. This South Carolina plant is designed not just for recycling but also for remanufacturing cathode active material and anode copper foil — components containing critical minerals that the U.S. government is keen to keep within domestic supply chains.
Redwood has previously stated its goal to be capable of making 100 GWh annually of cathode active material and anode foil by the end of this year. By the end of the decade, the company expects this production capacity to soar to 500 GWh, further solidifying its role in the future of battery manufacturing and recycling.
The Future of Energy Storage and AI Infrastructure
The launch of Redwood Energy signals a maturing market for second-life EV batteries. For years, the promise of using these batteries for grid storage has been discussed, but large-scale deployments have been slow to materialize. Redwood, with its established collection network and processing capabilities, appears uniquely positioned to finally deliver on this promise at scale.
The focus on AI data centers as an initial target market is particularly insightful. These facilities represent a concentrated and rapidly growing demand for reliable, high-density power. As AI capabilities expand and become more integrated into various industries, the energy requirements will only increase. Providing sustainable and cost-effective energy storage solutions is crucial for the continued growth of this sector.
Redwood Energy's model, leveraging existing battery inventory and integrating with renewable sources like solar, offers a blueprint for powering the digital infrastructure of the future in a more sustainable way. It demonstrates that materials previously considered waste can be transformed into valuable assets, contributing to both economic growth and environmental sustainability.
The success of the Nevada microgrid project with Crusoe provides tangible evidence of the viability and profitability of this approach. As Redwood expands its repurposing operations and deploys more gigawatt-hours of storage, it will not only create a new revenue stream but also play a vital role in balancing the grid, enabling greater integration of renewable energy, and supporting the power needs of the next generation of computing.
JB Straubel's vision for a circular battery supply chain is steadily becoming a reality, piece by piece. From recycling scrap and consumer electronics to producing critical battery components and now repurposing EV batteries for large-scale energy storage, Redwood Materials is building an ecosystem designed to handle the battery needs of the future. The launch of Redwood Energy is a significant milestone, demonstrating that the end-of-life for an EV battery is just the beginning of its next chapter in powering the world.