Forward-looking: Growing demand for AI-driven data centers is straining the energy grid. Repurposed electric vehicle batteries offer a promising solution, storing renewable energy more efficiently while reducing waste. This emerging technology could reshape how we power the digital age.

Redwood Energy, a Redwood Materials venture, aims to change how people use lithium-ion batteries. Instead of sending batteries from electric vehicles straight to recycling, the company gives them a second life, extending their use before reclaiming minerals like lithium, cobalt, and nickel. The company’s engineers and technicians found that many batteries still hold over half their original capacity after they’re no longer suitable for cars. Instead of breaking them down immediately, the team repurposes these batteries as stationary energy storage units.

Redwood runs a nationwide logistics network that collects over 70 percent of North America’s used battery packs each year. Technicians conduct advanced diagnostics to determine whether to reuse a battery or recycle it. Those that pass are assembled into modular energy storage systems, regardless of manufacturer or chemistry. Redwood’s control system enables these diverse packs to work together, storing and delivering electricity on demand.

Repurposed battery systems are a natural fit for modern data centers, which are expanding rapidly with the rise of AI and cloud computing. These facilities consume massive amounts of power, and analysts forecast a significant surge in demand. By 2028, data centers could use up to 12 percent of all electricity generated in the US. Traditional grid expansion and battery production can’t keep up, and while wind and solar are clean, they’re intermittent. Large-scale battery storage helps fill the gap by storing excess energy when it’s available and releasing it when it’s not.

A new microgrid built near Reno, Nevada, with AI infrastructure company Crusoe, shows this approach in action. The installation delivers 12 megawatts of power and 63 megawatt-hours of storage, making it the largest second-life battery deployment in the world – and the largest microgrid in North America. Hundreds of repurposed EV batteries, paired with solar panels, now power a data center running 2,000 GPUs. The entire project came together in just four months, far faster than the years it often takes to secure new grid connections or build a power plant.

It works well because stationary storage puts less strain on batteries than powering a moving vehicle. Electric vehicle batteries must handle rapid acceleration and constant cycling, but microgrids operate at slower discharge rates and lower frequencies. As a result, batteries no longer suited for cars can still perform reliably in this role – often at half the cost of new lithium-ion systems, with similar performance.

Redwood’s approach closes the battery lifecycle loop: after repurposing batteries in microgrids, the company eventually recycles them to recover critical minerals and feed the supply chain. This model has broad potential. With over five million electric vehicles on US roads and more than 100,000 retiring each year, the pool of reusable batteries is growing fast. Redwood estimates that these second-life batteries could eventually supply half or more of the entire energy storage market.

JB Straubel, founder of Redwood Materials and co-founder of Tesla, calls this just the beginning. He told Bloomberg the company already has enough reusable batteries to power microgrids supplying over a million homes for an hour, with plans for projects ten times larger than its current deployment.