Redwood Materials, the Nevada-based battery recycling and materials company founded by former Tesla CTO JB Straubel, has announced its strategic entry into the grid-scale energy storage market through a new business unit, Redwood Energy. This significant move aims to repurpose second-life electric vehicle (EV) batteries for large-scale energy storage systems (ESS), addressing a critical need for sustainable grid solutions and circular economy principles within the energy transition. The initiative's flagship project is a partnership with Crusoe, a vertically-integrated AI infrastructure provider, to develop a 12MW/63MWh solar-powered microgrid, marking it as the largest deployment of second-life batteries globally and the largest microgrid in North America.

Redwood Materials currently processes over 20 GWh of lithium-ion batteries annually, representing approximately 90% of all such batteries and materials recycled in North America. This volume is equivalent to the batteries from 250,000 EVs. A substantial portion of these incoming batteries retain over 50% of their original useable capacity, making them ideal candidates for less demanding stationary energy storage applications, where slower discharge rates are acceptable compared to the dynamic requirements of EV propulsion. The company reports an impressive deployment pipeline exceeding one gigawatt-hour (GWh) of reusable batteries, with designs already underway for projects surpassing 100MW in size.

The inaugural 12MW/63MWh microgrid will power one of Crusoe's AI data centers, demonstrating a practical application of this circular economy model. Crusoe operates large data center campuses, including a 1.2GW site in Abilene, Texas, and modular data centers in remote oil fields, highlighting the potential for second-life batteries to provide reliable, off-grid power for energy-intensive computing operations.

The market opportunity for second-life EV batteries in ESS is substantial. Redwood estimates that over five million EVs are currently active on U.S. roads, collectively representing an estimated 350 GWh of energy capacity that will eventually reach its end-of-life in the coming years. Projections indicate that over 100,000 EVs will exit U.S. roads this year alone. When combined with the 150 GWh entering the commercial fleet annually, Redwood posits that repurposed EV batteries could supply 50% or more of the entire energy storage market, offering a cost-effective and environmentally sound alternative to new battery production for grid applications. This strategy not only extends the useful life of valuable battery assets but also reduces the demand for virgin materials, aligning with broader sustainability goals across the renewable energy sector.