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

In just one year, Redwood Materials has transformed into a key player in the energy storage sector, driven by a surge in AI data center construction. What began as a minor aspect of the battery recycling and materials startup has swiftly evolved into its fastest-growing division. The company’s R&D lab in San Francisco has seen remarkable expansion, quadrupling its size to a substantial 55,000-square-foot facility and growing its workforce to nearly 100. While these numbers are modest compared to Redwood's overall staff of 1,200 across its headquarters in Carson City, Nevada, and a facility near Reno, the rapid growth of its energy storage segment is noteworthy. This division launched in June 2025 and has been pivotal in integrating the hardware, software, and power electronics necessary for energy storage systems that cater to data centers and AI computing. In a recent blog post, Redwood announced that this expansion will facilitate a significant wave of energy storage initiatives tied to data centers. The company bolstered its financial standing with a $425 million Series E funding round, attracting new investor Google along with existing supporter Nvidia to further its energy storage ambitions. Claire McConnell, Redwood’s vice president of business development, emphasized the urgency surrounding AI data centers in a conversation with TechCrunch. She noted the potential for their systems to also support renewable energy projects, such as solar and wind. Although data centers have existed for years, the rapid advancements in AI have ignited an unprecedented demand for reliable electricity. McConnell pointed out the challenges faced by data center developers, who are now encountering significant delays in grid connectivity—often exceeding five years—just as they are compelled to ramp up construction to stay competitive in the AI landscape. Founded in 2017 by former Tesla CTO JB Straubel, Redwood Materials initially concentrated on creating a circular supply chain for batteries. It started with recycling scrap from battery manufacturing and consumer electronics, selling processed materials to partners like Panasonic. The company has since broadened its focus to include battery materials production, now manufacturing cathodes for battery cells. Last summer, Redwood launched Redwood Energy, utilizing the vast number of EV batteries collected through its recycling efforts to supply power to businesses. Its inaugural client, Crusoe, a startup backed by Straubel, has received an energy storage system that repurposes old EV batteries that are not yet ready for recycling. This system boasts a capacity of 63 MWh and generates 12 MW of power, supplying energy to a modular data center operated by Crusoe, which is known for its expansive data center campus in Abilene, Texas. Looking ahead, McConnell revealed that they are in discussions with hyperscalers—companies managing enormous cloud computing data centers consuming vast amounts of power. These projects will significantly surpass the capabilities of the current collaboration with Crusoe, with some in the pipeline targeting hundreds of megawatt hours and even multiple gigawatt hours.