An AI data center boom is fueling Redwood’s energy storage business

A year ago, Redwood Materials didn’t have an energy storage business. Now, it is the fastest-growing unit within the battery recycling and materials startup — a reflection of an AI data center building boom.

The evidence of that growth, the company says, can be found at its R&D lab in San Francisco, which has expanded four-fold into a 55,000-square-foot facility and now employs nearly 100 people. Those are small figures compared to Redwood’s total workforce of 1,200 people and its sprawling campus at its Carson City, Nevada headquarters and another facility near Reno. But its value and recent expansion are tied directly to its burgeoning energy storage that launched in June 2025.

The San Francisco facility, which opened in April 2025, is where engineers integrate the hardware, software, and power electronics for energy storage systems that power data centers, AI computing, and other large-scale industrial applications.

The company said in a blog post Thursday the expansion will support a wave of energy storage deployments related to data centers. The company’s recent $425 million Series E raise will provide the capital needed to scale the business. Google, a new investor, as well as existing backer Nvidia, joined the round to support Redwood’s energy storage business venture.  

“AI data centers have definitely been a pressing area of focus,” Claire McConnell, vice president of business development told TechCrunch in a recent interview, who added there are other use cases for its systems including supporting renewable projects like solar and wind.

Data centers have been around for decades, but advancements in AI have spurred a building spree and a need for reliable electricity.

“What data center developers are seeing is something that they hadn’t experienced before,” McConnell said. “When they’re trying to connect to the grid, they are being told it is going to take five-plus years to get that and at the same time, you’re seeing this massive demand to build more data centers and compete in the AI race.”

Redwood Materials was founded in 2017 by former Tesla CTO JB Straubel to create a circular supply chain for batteries. It initially focused on recycling scrap from battery production and consumer electronics, which was processed and then sold to customers such as Panasonic. The company also expanded into the battery materials business and today produces cathodes for battery cells.

The company opened Redwood Energy last summer to leverage the thousands of EV batteries it has collected as part of its battery-recycling business to provide power to companies. Redwood Energy’s first customer is Crusoe, a startup that, in 2021, Straubel invested in. Redwood setup an energy storage system that uses old EV batteries that are not yet ready for recycling. The system, which generates 12 MW of power and has 63 MWh of capacity, sends power to a modular data center built by Crusoe, a company best known for its large-scale data center campus in Abilene, Texas — the initial site of the Stargate project. 

McConnell said customers that are in the pipeline include hyperscalers — companies that operate massive cloud computing data centers and consume hundreds of megawatts of power — that would far exceed the capacity of its project with Crusoe.

“We’re working on ones in the hundreds of megawatt hours, and we have ones in the pipeline that are multiple gigawatt hours,” she said.