Deep dive: Redwood Materials

TL;DR

• Electrification – and the rapid adoption of EVs in particular – is expected to increase demand for lithium-ion batteries by 90%. However, the mining process required to generate lithium comes with high carbon emissions and uses a large quantity of water despite mining fields generally being in areas where clean water is scarce.

• Redwood Materials is a US-based company that has partnered with several automotive manufacturers to recycle their end-of-life batteries and produce new anode and cathode components. By 2025, it is aiming to produce enough of these components to power one million EVs.

• Its plant in Reno, Nevada also operates sustainably. The calcination process it employs doesn’t create any alloys or slag waste, nothing goes to landfill, and no water leaves the premises other than sanitary waste. It also uses 80% less energy and water, and generates 70% fewer CO2 emissions, than a traditional facility using mined materials.

• Circular supply chains like this could provide an answer to many of the persistent issues plaguing the lithium-ion battery industry. It can safeguard against raw material supply shortages and price volatility, reduce the risks related to battery waste disposal, contribute more than $400 billion to the global economy, and create up to 18 million jobs.

• Pioneers like Redwood Materials show what’s possible, but legislators can incentivise others to follow its lead by setting battery recycling targets, improving transparency in the supply chain, and providing financial incentives.

• If battery recycling were to be more widely adopted, it could reduce the demand for raw materials by up to 64% by 2050 and produce 80% fewer emissions than extraction.

The detail

In our recent newsletters, we’ve been taking a closer look at the role electrification will play in the fight against climate change. As the world transitions to technologies driven by electricity, it’s become increasingly clear that batteries – especially lithium-ion batteries – are a crucial part of the puzzle, particularly when it comes to encouraging drivers to make the switch from fossil fuels to electric vehicles (EVs). In fact, in large part due to the increased demand for EVs, the lithium-ion battery market is expected to grow from $57 billion in 2023 to $187 billion by 2032.

Despite their myriad benefits, batteries also have limitations and leave a considerable carbon footprint. The International Energy Agency (IEA) has estimated that, in order to meet the goals of the Paris Agreement, there will be a 90% increase in demand for lithium. To put figures against this statistic, the demand for lithium-ion batteries is predicted to increase from 700 GWh (in 2022) to approximately 4.7 TWh by 2030. By 2025, China alone could account for 45% of this demand.

Lithium mining is also a flawed system. It emits 1.3 million tonnes of carbon dioxide each year and is often concentrated in areas of the world where water is already scarce. This inevitably causes issues as the evaporation method used for lithium extractions requires up to half a million gallons of brine water to produce one tonne of lithium. In the mining fields of Salar de Atacama in Chile, for example, indigenous communities have been harmed as the area’s lithium and copper mining industry has reportedly consumed over 65% of the local water supply.

Happily, several legislative changes and innovations, especially in battery recycling, present a potential way forward that will allow electrification to continue at pace without causing significant environmental harm.

Enter Redwood Materials.

A closed-loop company

There are many reasons why I’ve been impressed by this Nevada-based company. Founded by Tesla co-founder and former Chief Technology Officer, JB Straubel, in 2017, Redwood Materials has the potential to be a game-changer in the realm of battery recycling. The company is working to develop a closed-loop, domestic supply chain for lithium-ion batteries. It intends to manage every step of the process, from the collection, refurbishment, recycling and refining of expired batteries to the remanufacturing of sustainable battery materials.

In the US, the existing battery supply chain is expensive and unsustainable – and that’s without factoring in the pressures caused by increased demand, which is expected to grow by 500% in the next 10 years. The US will require approximately 300 TWh of battery capacity to become fully sustainable and, quite frankly, the supply chain can’t support that kind of growth. It’s worth keeping in mind that the critical materials needed to create new batteries in the first place must travel over 50,000 miles before they reach an equipped factory.

Redwood is aiming to localise the battery supply chain through recycling. At its plant in Reno, Nevada (and its site under-construction in Charleston, South Carolina), recycled batteries are being used to produce anode and cathode components in the US for the first time. This could increase the availability of battery materials, accelerate the transition away from fossil fuels, and reduce the environmental impact, cost and supply chain risks that currently negatively impact the global battery industry.

The company has partnerships in place to recycle expired EV batteries with the likes of Tesla, Ford, General Motors, Toyota and Nissan. In the last month, it’s also entered a new partnership with BMW. The motor group, which includes BMW, Mini and Rolls-Royce, will now also send end-of-life batteries from its battery-electric and hybrid vehicles to Redwood for recycling.

Sustainability at every stage

With these high profile partners on board, it’s perhaps unsurprising that Redwood’s Reno site is now processing 30,000 tonnes of end-of-life batteries and production scrap each year. The plant uses a process of reductive calcination to fully liberate nickel, cobalt, graphite and lithium from other materials, purifying them into intermediaries or converting them into chemicals to produce high-grade cathode active materials.

The plant itself is also environmentally conscious. The calcination process employed doesn’t create any alloys or slag waste, nothing goes to landfill, and no water leaves the premises other than sanitary waste. That’s not all; it uses 80% less energy and water, and generates 70% fewer CO2 emissions, than a traditional facility using mined materials.

Outside of the automotive industry, Redwood has partnered with Stanford University to continually improve its operations. Its research has proven that the Redwood approach results in at least 40% fewer emissions than other recyclers. It also identified that the peroxide Redwood was using in its hydrometallurgy process was having a severe impact on its total carbon footprint, a finding that has since allowed the company to redesign its processes and eliminate peroxide altogether.

Looking ahead, Redwood aims to recover 95% of the key battery elements and supply these raw materials back to the US battery manufacturers. If it achieves its ambitious goals, the company’s plants will produce enough anode and cathode to power one million EVs a year by 2025, increasing to five million a year by 2050.

Circularity for change

Along with its big-name partnerships and lofty targets, Redwood has impressed me with its adoption of a circular supply chain. In fact, it sees circularity as essential to powering a sustainable world.

By adopting this attitude, Redwood is setting a benchmark for others to follow. If electrification is to realise its full potential, the battery industry must move from a linear to a circular value chain, one in which used materials are repaired, reused or recycled.

If lithium-ion batteries are to improve their environmental reputation and support the fight against climate change, manufacturers need to be proactive rather than reactive when it comes to sustainability – and circularity offers a wealth of untapped potential. Although recycling is likely to remain small in scale until 2030, between 2030 and 2040, it could grow more than three-fold as more batteries start to reach end-of-life.

Switching to this way of working could help safeguard against raw material supply shortages and price volatility, reduce the risks related to battery waste disposal, and provide impressive economic and employment opportunities. It’s estimated that it could contribute more than $400 billion to the global economy and create up to 18 million jobs.

It won’t be an easy task; it will require a co-ordinated, cross-industry effort incorporating data transparency and consistent standards to unlock the full value of circularity.

Guiding the way

Until this threshold is reached, legislation can be employed to help reduce the overall demand for mined raw materials and encourage battery recycling. The EU is leading the world in this regard, setting a battery recycling target of 80%, and introducing targets for the collection and reuse of batteries, recycling efficiency rates, and content standards for new batteries.

In the US, there are currently no federal policies in place to encourage improvements in the battery supply chain. With no recycling mandates, no requirement to design batteries that are easily recyclable, and a general lack of transparency across the industry, there is much that needs to be addressed. Battery storage and transport in the country accounts for between 40 and 60% of battery recycling costs while the cost of extracting critical materials can often be higher than producing a new battery.

Policymakers can’t solve the issues alone, but working alongside businesses and investors, they could introduce initiatives such as battery passports, which can digitally track each battery throughout its lifecycle, reclassifying the risks around battery waste, reducing complexity throughout the supply chain, and providing incentives to encourage recycling. If these steps were taken and persistent issues resolved, recycling could reduce the demand for raw materials by up to 64% by 2050 and produce 80% fewer emissions than extraction.

The rapid growth of Redwood Materials proves there is appetite for battery recycling from the EV manufacturers themselves and there are commercial opportunities to grasp. Redwood is plugging the gap in a country that lacked a localised battery industry, operating sustainably, at scale, and with considerable financial success, raising nearly $2 billion in equity capital.

It showcases the benefits of circularity, now it’s up to the rest of the world to do the same.

— Lew 👋

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