Redwood Materials Enters Energy Storage: Repurposing EV Batteries for AI Data Centers

In the Nevada desert, a field of 805 old electric vehicle (EV) batteries—wrapped in plain white tarps—now makes up North America's largest microgrid, delivering power to a modular data center. This unassuming site marks a major pivot for Redwood Materials, renowned for recycling EV batteries, as it launches its energy storage business with an eye on the booming AI data center market.

A New Chapter: Redwood Energy

Redwood Materials, led by Tesla co-founder JB Straubel, has introduced Redwood Energy, a division aimed at repurposing retired EV batteries before they’re actually recycled. With its initial partner Crusoe—an AI infrastructure startup—Redwood Energy’s microgrid collects solar power, stores it in its bank of used EV batteries, and feeds it to a Crusoe-run modular data center, supporting advanced AI computation.

This system, generating 12 megawatts (MW) and holding 63 megawatt-hours (MWh) of capacity, isn’t just a pilot; it’s already revenue-generating and, according to Straubel, profitable. Redwood expects to rapidly expand this business model, leveraging a battery supply it’s been amassing from its recycling operations. The company processes over 20 GWh of batteries annually—enough from about 250,000 EVs—and has more than 1 GWh in inventory, anticipating up to 4 GWh more in the near term. By 2028, they plan to deploy 20 GWh of grid-scale storage, aiming to be the industry’s largest repurposer of old EV battery packs.

From Recycling to Circular Supply Chains

Redwood’s evolution has been rapid. Since its 2017 founding, it’s revolutionized battery recycling—recovering key minerals like nickel, cobalt, and lithium from discarded electronics and manufacturing scrap, then supplying these to battery makers like Panasonic. Recently, Redwood has entered cathode production and expanded its manufacturing footprint, including new plants and acquisitions in the US and Europe.

These operations generated $200 million in 2024, mostly from battery material sales. Redwood’s deals span industry leaders, including Toyota and General Motors, and support US efforts to localize critical mineral supply chains.

The Business Case for Repurposed Batteries

Redwood Energy highlights the lag between expectations for used EV battery markets and reality. While millions of EV batteries are forecast to enter recycling streams in coming years, the market remains dominated by consumer electronics and manufacturing scrap. By offering a repurposing solution today, Redwood can monetize these assets long before true end-of-life recycling is needed.

Colin Campbell, Redwood’s CTO, emphasized that the microgrid is a pure economic play—not merely a sustainability initiative. Their systems can operate on renewables or conventional grids, giving clients flexibility and carbon-free options without a green premium.

Scaling the Opportunity—And Facing Challenges

For over a decade, companies have touted the possibility of grid-scale storage using second-life EV batteries, but deployments haven't lived up to the hype. Redwood is betting its extensive battery collection and materials expertise will finally bridge that gap, unlocking gigawatt-scale installations just as energy demands surge—especially from AI and hyperscale computing.

Jessica Dunn, a battery policy analyst, noted that Redwood’s move validates the economic case for repurposing and shows where the end-of-life battery market is heading. Dunn argues that if Redwood waited for full recycling eligibility, they’d miss out on years of revenue and allow other players to dominate grid storage solutions.

Deep Founder Analysis

Why it matters

This strategic pivot by Redwood shows how mature players in one tech sector can leverage their core assets (in this case, expertise and inventory in batteries) to address rapidly emerging infrastructure gaps—here, the colossal power needs of AI data centers. The shift signals a move from linear recycling to circular, value-extending use-cases, deepening the business case for clean tech startups and supply chain resilience.

Risks & opportunities

Risks include uncertainty in secondary battery reliability, regulatory hurdles, and potential supply chain bottlenecks, especially as high-quality used batteries become hot commodities. However, the opportunity is vast: grid operators and AI facilities are chasing robust, flexible storage. The precedent set by Tesla’s energy storage business shows there is appetite and capital for scaling repurposed technologies, not just new ones.

Startup idea or application

One opportunity is a B2B platform that aggregates, certifies, and monetizes second-life EV batteries for mid-scale energy users—think small data centers, community microgrids, or commercial campuses—bridging the gap between battery suppliers and energy hungry tech clients. This platform could provide diagnostics, warranty tracking, performance analytics, and even carbon accounting as a SaaS layer atop physical deployments.

Looking Ahead: Redwood’s Expanding Footprint

Redwood is constructing a new 600-acre facility in South Carolina for cathode and anode foil manufacturing, supporting up to 500 gigawatt-hours of materials production by decade’s end. As supply of end-of-life EV batteries ramps up, the dual revenue streams from both battery repurposing and mineral extraction position Redwood—and similar startups—for sustained growth in both the clean tech and critical infrastructure sectors.

Energy Storage EV Batteries AI Infrastructure Battery Recycling Startups

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