Redwood's Energy Storage Business Booms Amid AI Data Center Expansion

The battery recycling startup's energy storage unit is its fastest-growing division, fueled by demand from data centers.

Published on Feb. 26, 2026

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Redwood Materials, a battery recycling and materials startup, has seen its energy storage business become its fastest-growing unit in the past year. The company says this growth is driven by a boom in AI data center construction, as data center developers are facing long delays in connecting to the grid and need reliable electricity sources. Redwood has expanded its R&D lab in San Francisco four-fold to a 55,000-square-foot facility to support the integration of hardware, software, and power electronics for its energy storage systems.

Why it matters

The rapid expansion of Redwood's energy storage business highlights the growing demand for reliable power sources to support the surge in AI-powered data centers. As data centers race to build out capacity to compete in the AI market, they are facing grid connection challenges that are driving the need for alternative energy storage solutions like those provided by Redwood.

The details

Redwood Materials launched its energy storage business in June 2025 and has since seen it become the fastest-growing unit within the company. The company's San Francisco R&D lab, which opened in April 2025, has expanded four-fold to a 55,000-square-foot facility and now employs nearly 100 people. This facility is where Redwood integrates the hardware, software, and power electronics for its energy storage systems that power data centers, AI computing, and other large-scale industrial applications. Redwood recently raised $425 million in a Series E round, with new investor Google and existing backer Nvidia supporting the company's energy storage business venture.

  • Redwood Materials launched its energy storage business in June 2025.
  • Redwood's San Francisco R&D lab opened in April 2025.

The players

Redwood Materials

A battery recycling and materials startup founded in 2017 by former Tesla CTO JB Straubel to create a circular supply chain for batteries.

JB Straubel

The founder of Redwood Materials and former CTO of Tesla.

Claire McConnell

The vice president of business development at Redwood Materials.

Google

A new investor in Redwood Materials' recent $425 million Series E round.

Nvidia

An existing backer that joined Redwood Materials' recent $425 million Series E round.

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What they’re saying

“AI data centers have definitely been a pressing area of focus.”

— Claire McConnell, Vice President of Business Development (TechCrunch)

“What data center developers are seeing is something that they hadn't experienced before. 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.”

— Claire McConnell, Vice President of Business Development (TechCrunch)

The takeaway

Redwood Materials' rapid expansion of its energy storage business highlights the growing demand for reliable power sources to support the surge in AI-powered data centers. As data centers race to build out capacity to compete in the AI market, they are facing grid connection challenges that are driving the need for alternative energy storage solutions like those provided by Redwood.