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

Just a year ago, Redwood Materials didn't even have an energy storage division. Today, that segment has become the fastest-growing part of the battery recycling and materials startup — a shift the company links directly to the surge in AI data centre construction.

Redwood says the clearest sign of that momentum is in its San Francisco R&D operation, which has expanded fourfold over the past year into a 55,000-square-foot facility and now employs nearly 100 people. Those numbers are still modest compared with Redwood's overall workforce of about 1,200 employees, its sprawling headquarters campus in Carson City, Nevada, and its additional facility near Reno. Still, the company argues that San Francisco's growth is closely tied to the rapid scaling of its energy storage effort, which officially launched in June 2025.

The San Francisco site, which opened in April 2025, is where Redwood's engineers bring together the key building blocks behind its storage offerings — integrating hardware, software, and power electronics to assemble energy storage systems designed to support data centres, AI compute loads, and other large-scale industrial applications.

In a blog post published Thursday, the company said the expanded footprint will help it meet a new wave of energy storage deployments tied to data centre demand. Redwood also pointed to its recent $425 million Series E fundraising round as a major part of its scaling plan, saying the financing will provide the capital needed to grow the business. The round included Google as a new investor, and existing backer Nvidia also participated, with the company framing both as supporters of Redwood's push into energy storage.

"AI data centre has definitely been a pressing area of focus," Claire McConnell, vice president of business development, said in a recent interview, while also noting the company sees other applications for its systems, including support for renewable energy projects such as solar and wind.

Data centres have existed for decades, but Redwood argues that the rise of modern AI workloads is accelerating the pace of new builds and intensifying the need for a reliable electricity supply.

"What data centre 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 centres and compete in the AI race."

Redwood Materials was founded in 2017 by former Tesla CTO JB Straubel to create a circular battery supply chain. The company's early focus was on recycling scrap from battery production and consumer electronics. That material was processed and then sold to customers such as Panasonic. Over time, Redwood expanded into battery materials and now produces cathodes used in battery cells.

Last summer, Redwood launched Redwood Energy to use the thousands of EV batteries it has collected through its recycling operations to deliver power to businesses. Redwood Energy's first customer is Crusoe, a startup that Straubel invested in back in 2021. Redwood set up an energy storage system that uses used EV batteries that are not yet ready for recycling. The system produces 12 MW of power and offers 63 MWh of capacity, supplying electricity to a modular data centre built by Crusoe. Crusoe is best known for its large-scale data centre campus in Abilene, Texas — a site identified as the initial location for the Stargate project.

McConnell said Redwood's pipeline includes customers at an even larger scale, including hyperscalers — operators of massive cloud computing data centres that can consume hundreds of megawatts — which would greatly exceed the capacity of the company's first deployment 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.