Redwood Materials diverts its huge battery hoard toward the AI energy boom

Business Insider

a day ago

In March, I visited a strange place in the high desert east of Reno, Nevada.
This is where JB Straubel 's startup Redwood Materials is turning a vast hoard of old batteries into valuable ingredients that power electric vehicles and other new devices.
The weirdest part: Redwood's HQ was surrounded by massive new data center projects. Right opposite, a ginormous Google complex rose up from the scrub and brush. And the hills around were flattened like pancakes, awaiting even more of these beasts.
The demand for data centers is exploding because of generative AI. The GPUs and other gear required to train and run AI models are extremely energy-hungry, which means there is a huge new demand for power to operate these facilities.
Redwood has taken the hint from its big neighbors. On Thursday, the startup unveiled a new business called Redwood Energy to help power the AI boom by repurposing used batteries into energy storage systems.
From EV batteries to powering the AI era
Redwood Materials made its name extracting valuable metals and minerals from end-of-life batteries and channeling this back into the EV supply chain. Its latest move aims to capture the enormous second-life value these batteries can offer before they're recycled.
Every year, Redwood processes more than 20 GWh of used lithium-ion batteries, representing about 250,000 EVs, or 90% of lithium-ion batteries recycled in North America. The company says most of those battery packs still retain 50% to 80% of their original capacity. While no longer suitable for vehicles, they're viable for stationary energy storage, especially in an era where data center energy needs are skyrocketing.
The recent explosion of AI data center construction around Redwood's Nevada campus paints the picture. These facilities demand more power than traditional cloud infrastructure, and the existing grid struggles to keep up. Enter Redwood Energy.
Reinventing energy storage
Redwood Energy aims to transform lightly used EV batteries into energy storage systems that can serve data centers, industrial customers, and the grid. Its first deployment is already live: a battery system with 12 MW of power and 63 MWh of storage that powers a 2,000-GPU data center for Crusoe, an AI infrastructure firm. It's the largest second-life battery deployment in the world and the biggest off-grid data center in North America, according to Redwood.
Redwood says its system sidesteps fossil fuels, reduces carbon emissions, and avoids the permitting delays of traditional infrastructure. It also costs less than new lithium-ion installations, thanks to Redwood's vertically integrated process from collection and diagnostics to integration and final recycling.
A full-circle energy platform
The backbone of Redwood's solution is an established and capable logistics and diagnostic system. It recovers more than 70% of battery packs from across North America. Its in-house software evaluates each battery to determine if it's fit for reuse.
Redwood integrates qualified packs, regardless of original manufacturer, into energy storage systems. When they finally reach end-of-life, Redwood funnels the batteries back into its recycling operation to recover metals and minerals for new batteries.
"We're excited about this new business line," said Chris Evdaimon, an investment manager at Baillie Gifford, a major backer of Redwood Materials. "It is an expression of the moat they have been building around the collection and qualification of end-of-life EV and storage batteries."
"The simplicity and efficiency of their energy storage system design, in terms of infrastructure requirements and ability to be off-grid, is an ideal solution for the ever-growing data center energy requirements," he added.
Evdaimon praised the company for having "great timing, significant scaling opportunity, and potentially a cash-generative business from the beginning," which can help with Redwood's investment in recycling and cathode active materials (CAM).
You can read more about CAM, also known as the new black gold, here.
Scaling with the market
The opportunity is immense. More than 100,000 EVs will reach end-of-life this year in the US alone. Over 5 million EVs on US roads represent 350 GWh of latent energy storage capacity, and that number grows by 150 GWh annually, Redwood estimates.
Redwood Energy expects to deploy 20 GWh of second-life battery storage by 2028. That energy could power AI supercomputers, stabilize grids, and store renewable energy for cities, while reducing costs and emissions compared to traditional energy sources.
In a world racing to electrify and feed the AI beast, Redwood offers a potential win-win: environmental sustainability and economic scalability. As grid demand surges and geopolitical risk complicates global supply chains, Redwood's American-made, infinitely recyclable solution may prove to be a cornerstone of AI's new energy economy.