From Scrap to Power: Redwood’s Second-Life Battery Revolution

 

Redwood Energy’s Next Act: Turning Retired EV Batteries Into a Profitable Powerhouse for AI Data Centers

SPARKS, NEVADA — In the quiet hills of the Nevada desert, hidden beneath white tarps, lie more than 800 retired electric vehicle (EV) battery packs. To the untrained eye, this may look like storage. But for JB Straubel, co-founder of Tesla and now CEO of Redwood Materials, this is a billion-dollar opportunity — and the start of something transformative.

On Thursday, Redwood Materials launched its new business line: Redwood Energy — a strategic offshoot focused on large-scale energy storage, powered not by newly minted batteries, but by repurposed EV packs. The company’s first deployment: an off-grid microgrid powering a modular AI data center built by Crusoe, a company known for its large-scale compute infrastructure, particularly in Abilene, Texas.

But this is no pilot. This is revenue-generating infrastructure — already built, running profitably, and scalable by design.

🧠 A Second Life for EV Batteries

Straubel’s logic is simple and powerful: while the world waits for the wave of EV batteries to reach their end-of-life, Redwood has already stockpiled over 1 GWh of used batteries that aren’t ready to be recycled — but aren’t useful in vehicles either. In other words: they're in limbo. Redwood’s solution? Give them a second life as grid-scale energy storage.

The system deployed with Crusoe is impressive. Solar panels provide 12 MW of clean power, which the battery packs store and deliver with a combined capacity of 63 MWh. That energy powers 2,000 GPUs, essential for training AI models that run continuously, day and night.

💰 Business Model Deep Dive: BEP, IRR, ROI

Redwood’s entry into this space isn’t just ecological — it’s financial. This is a model designed to be profitable from day one, with favorable return metrics:

Metric	Projection
BEP (Break-Even Point)	2.5 – 3 years
IRR (Internal Rate of Return)	18% – 24% (depending on load profile and solar availability)
ROI (5-Year)	>45%

Why are the returns so high?

• The batteries are already in inventory and require minimal cost to repurpose.

• The solar energy is free once installed — no variable fuel costs.

• Demand from AI data centers is nonstop and growing.

• Off-grid systems command premium pricing and allow for energy arbitrage.

Straubel summed it up succinctly:

“This could grow faster than our core recycling business.”

🧩 Who Gets What: Main Contractor, Subcontractor, and Customer Roles

The deployment model is cleanly structured:

• Redwood Energy acts as the EPC (Engineering, Procurement, Construction) contractor and asset owner.

• Crusoe is the offtaker, consuming the energy under a long-term power purchase agreement (PPA).

• Technology vendors — battery management system (BMS) suppliers, inverter manufacturers, solar array providers — serve as subcontractors.

This enables Redwood to maintain control of the assets, reap energy sales revenue, and position itself as an independent power producer (IPP).

🟢 Who Benefits Most?

Redwood Materials:

• Monetizes idle inventory of used EV batteries

• Builds recurring revenue streams

• Positions itself as a dominant force in energy storage, not just recycling

Crusoe:

• Accesses green, low-cost, reliable energy

• Reduces dependence on grid

• Enhances ESG profile and data center uptime

Investors:

• Gain access to a high-IRR, asset-heavy utility model

• Exposure to both AI and renewable infrastructure sectors

• ESG-compliant returns with stable demand

🔴 Risks and Limitations

Like any bold move, Redwood’s energy pivot has potential challenges:

Risk	Impact
Battery variability	Requires advanced BMS to prevent system degradation
Regulatory uncertainty	Not all jurisdictions recognize second-life batteries
Insurance & warranty complexity	Limited precedents for repurposed battery coverage
Depreciation	Technology obsolescence can reduce future value

Yet the potential upside — especially when batteries are nearly zero-cost assets — makes the risk-reward profile highly favorable, especially in markets with high energy prices or remote infrastructure needs.

🔮 What’s Next: Scaling Forward

Redwood’s ambitions go far beyond this single site. The company expects to:

• Deploy 20 GWh of grid-scale storage by 2028

• Integrate wind and solar inputs for hybrid systems

• Expand into off-grid mining sites, island nations, disaster recovery zones, and AI-heavy server farms

The demand is there. And Redwood already has over 5 GWh of batteries in its possession, with 4 GWh more expected in the near term.

More than that, Redwood’s 600-acre facility in South Carolina is poised to supply cathode active materials and anode copper foil — giving it vertical integration from mineral recovery to repurposed energy storage.

🌎 Why This Matters

For over a decade, the promise of using second-life EV batteries for grid storage has remained just that — a promise. Technical, regulatory, and market barriers held it back.

But Redwood — by owning both the supply (retired batteries) and the integration capability (microgrid systems) — may be the first to crack the model.

Jessica Dunn, senior battery expert at the Union of Concerned Scientists, puts it plainly:

“If Redwood hadn’t entered the repurposing market, they would’ve missed out on years of revenue.”

Instead, they’re now poised to lead it.