On June 26, 2025, Redwood Materials — the battery recycling company founded by JB Straubel — announced a new business line called Redwood Energy: instead of sending retired EV batteries straight into the recycling line, the company will assemble them into stationary storage systems, and its first target customer is the AI data center. Straubel, the Tesla co-founder and former CTO, started Redwood in 2017 — recycling first, then cathode materials, and now storage: a three-stage bet on the battery value chain.
The first project is already live. Working with AI infrastructure firm Crusoe at Redwood’s campus near Reno, Nevada, the company paired 805 used EV batteries with a solar array into a microgrid delivering 12 MW of power and 63 MWh of capacity, supplying a modular data center with 2,000 GPUs.
From recycling to storage
Redwood’s core asset is scale. The company processes more than 20 GWh of retired lithium-ion batteries a year — roughly 250,000 EVs — covering the large majority of lithium-ion batteries recycled in North America. Economics are the point: used packs cost less than new cells and skip the interconnection queue — what Straubel calls “the lowest-cost solution out there.” Most of those packs still hold 50 to 80 percent of their original capacity when vehicles retire, and shredding them immediately throws away value that is still usable.
The logic of Redwood Energy is therefore simple: put the still-good batteries to work in second-life stationary storage first, earn from that phase, and only then feed them into the existing recycling lines, closing the loop. Straubel said the new business has the potential to grow faster than the core recycling operation, and the company has already stockpiled more than 1 GWh of usable batteries.
The first project: a Crusoe microgrid in Nevada
The system went from construction to operation in just four months. Running alongside a solar array, MIT Technology Review reported that it should cover more than 99 percent of the local electricity needs of Crusoe’s data center, with the grid stepping in only during rare stretches of low sunlight. TechCrunch cited Straubel stressing that this is not a demonstration project — it is a commercial system that is already profitable and generating revenue.
The Crusoe name is familiar to the AI industry: the company is building the massive Stargate-related data center campus in Abilene, Texas, tied to OpenAI. Making an AI compute customer the launch customer of the storage business was a deliberate entry choice — nobody understands power scarcity like a compute customer. Crusoe is scaling fast too — MIT Technology Review notes its first Abilene facilities expect 100,000 GPUs by year’s end, so the customer’s own growth curve is the demand curve.
Why AI data centers first
The growth of AI data center power demand is the backdrop that makes this business work. The IEA projects data center electricity use could double by 2030, driven largely by AI; interconnection queues, grid expansion timelines, and diesel generator emissions make fast, cheap, clean power a hard requirement.
Second-life battery microgrids land exactly in that gap: capacity costs less than new cells, deployment is faster than grid expansion, and the system can run primarily on renewables. MIT Technology Review cited research estimating that if new AI data centers are powered by solar microgrids with limited gas backup, substantial carbon emissions can be avoided compared with running entirely on natural gas.
What it means for AI infrastructure
The launch connects two curves. On one side, more than 100,000 EVs retire in the US every year, so the supply of second-life batteries will pile up quickly — Redwood estimates EVs already on US roads hold 350 GWh of potential storage. On the other side, the power deficit of AI data centers keeps widening. The company’s stated goal is to deploy 20 GWh of grid-scale storage by 2028, which would make it the largest repurposer of used EV packs. Baillie Gifford’s investor called the business potentially “cash-generative from the beginning,” funding the recycling and cathode-materials work in turn.
For teams planning AI infrastructure, this adds another power option: beyond waiting for grid interconnection or building gas turbines, second-life storage plus renewables now has a real commercial reference case. The June 2025 launch may well become an early template for the merger of the compute and power industries.
Sources
- TechCrunch: Redwood Materials launches energy storage business
- MIT Technology Review: This battery recycling company is now cleaning up AI data centers
AI-assisted summary compiled from the sources above, reviewed by a human before publishing.