As demand for energy skyrockets amid the rise of AI, one of Tesla‘s co-founders is betting on a new solution: giving old electric vehicle batteries a second-life.
JB Straubel, who helped launch Tesla and served as its tech chief until 2019, founded Redwood Materials in 2017 to recycle batteries and build a closed-loop supply chain for EVs. But as Redwood started receiving more EV batteries, the startup noticed that most still had usable capacity. Rather than recycle those batteries, Redwood is now repurposing them for microgrid projects that could provide cheap energy storage for new and existing data centers.
“We’re just finding a way to basically wring a little bit more value out of those batteries,” Straubel told CNBC.
For its first microgrid, Redwood partnered with Crusoe, best known for the massive AI data center it is building in Abilene, Texas, as part of Stargate, a $500 billion AI infrastructure project backed by OpenAI, Oracle, SoftBank and others. Redwood says its system is the largest of its kind in North America. It generates 12 megawatts of power through a solar array, and has 63 megawatt-hours of capacity using the repurposed EV batteries.
“In the energy industry, the holy grail has been 24/7 renewable power, but forever the cost of batteries was too high, until today,” says Cully Cavness, Crusoe co-founder, COO and president.
The global data center market is experiencing a surge in growth due to the AI boom. According to Goldman Sachs, AI is estimated to drive a 165% increase in data center power demand by 2030. Redwood and Crusoe said they see data centers as a key beneficiary of the technology, helping hyperscalers deploy with speed and power redundancy, at an affordable cost.
“This is cost effective, rapidly deployable, scalable 24/7 renewable power and AI data center computing as one integrated package,” Cavness said.
Redwood says it has over a gigawatt-hour of reusable batteries in its inventory, the equivalent of 12,500 TVs, and it’s designing 100 plus megawatt projects, up to 10 times the size of the pilot microgrid with Crusoe.
“The scalability of this really doesn’t have a limit,” Straubel told CNBC. “We can use the same type of architecture and scale this up by a factor of 100 or more. We’re already working on engineering projects that are in that type of magnitude.”
In addition to its recycling business, Redwood will now be competing in a growing energy storage market with established players like Tesla, which has built a successful energy business with its Megapack grid-scale storage. But experts say there is plenty of room for new entrants to meet demand.
“The future demand for energy storage specifically is massive, so it’s not surprising that players who traditionally haven’t been in this space are looking to enter,” said Pete Tillotson, senior research analyst with Benchmark Mineral Intelligence. “I would imagine this second-life piece is going to be used for more focused, slightly smaller projects. Potentially with clients where cost is a little bit more of a limiter.”
Watch the video to see how Redwood Materials has grown its recycling operations and learn more about its plans to use second-life batteries to meet the surging energy needs of the AI era.