The engineer who helped Elon Musk turn Tesla into a powerhouse sees a future “where every vehicle is electric” – and an unfathomably profitable market in recycling the valuable metal from all those batteries.
Four years ago Tesla’s CTO JB Straubel was ramping up battery output at its sprawling Gigafactory near Reno, Nevada when inspiration struck: Why not start a company to recover metals from the factory’s scraps and other used electronics and turn them back into usable lithium, cobalt and graphite to make new batteries. Figure out how to do that at a low enough cost and a large enough scale and you’d have a real impact, boosting the supply of rare and valuable metals while easing the environmental harm of mining and keeping toxic batteries out of landfills. Later that year, while still working at Tesla, which he cofounded with Elon Musk and three others, Straubel started Redwood Materials as a “new-generation mining company” in nearby Carson City.
“Electrification of everything is moving ahead and the demand for batteries is stratospheric,” says Straubel, 45. “Our mission at Tesla was to help catalyze this, to ignite all this excitement on electric vehicles. It’s very rewarding to see it happening, but it’s happening almost so fast it’s running ahead of the ability for the whole supply chain to make it real.”
In 2020, Tesla sold around 500,000 electric cars, each one requiring thousands of lithium-ion battery cells and is targeting a 50% increase this year. Battery demand is further being stoked as giants General Motors and Volkswagen aggressively pursue their EV plans alongside all-electric startups like Lucid and Rivan. Prices of core battery materials like lithium (up 127% in the last 12 months) and cobalt (up 69%) are skyrocketing. But Straubel has early good news: after just one year of operation, Redwood Materials can already salvage tons of usable metals at costs below conventional mining.
“Most people sort of expect the opposite: [that it would be] too expensive today, but maybe it’ll be cheaper in the future. It’s actually cost-competitive today,” he says. “Our goal is to make it even more competitive so that we can make more recycling happen.”
Straubel is tightlipped on Redwood’s financials but the privately held company is probably doing around $20 million in revenues. In July Redwood raised $40 million from Amazon, Breakthrough Energy Ventures and Palo Alto-based Capricorn Investment Group. That brings its total outside funding to $48 million at a $217 million valuation according to PitchBook. Straubel has likely invested millions more from his own fortune which is estimated at $900 million. The company is currently scaled to recover enough material for 45,000 electric car battery packs annually. If it does that could generate $90 million of revenue, based on Benchmark Mineral Intelligence’s estimate that the commodity metal content per pack is worth about $2,000. Buyers of Redwood’s reclaimed alloys include Panasonic, which makes cells at Tesla’s Nevada Gigafactory, and EV battery specialist Envision AESC–which also supply it with lithium-ion scraps.
The surge in battery demand will eventually create a recycling market worth “hundreds of billions” of dollars annually, Straubel estimates. “When every vehicle is electric and all of the batteries for the world fleet of cars and trucks are needing to be recycled, you can pretty easily calculate what is the value of that industry.”
Where Elon Musk is verbose and relishes his status as a clean-tech icon, the low-key Straubel, who trained as an engineer at Stanford, chooses his words carefully. The electric car revolution the two men envisioned when they first met 18 years ago is finally coming to fruition. The Biden Administration is calling for a range of incentives to wean drivers off gasoline and onto electricity, seeking a huge increase in domestic production of battery-powered autos and heavy-duty trucks. His proposed $2.25 trillion infrastructure plan, if it passes, earmarks $174 billion to aid EV and battery manufacturing and to install 500,000 new charging stations.
“The number of projects being announced, both new electric vehicle companies…and new Gigafactories, all of this is way outstripping our ability to project where the materials will come from.”
— JB Straubel, Redwood Materials CEO and cofounder
Benchmark Mineral Intelligence estimates global demand for electric vehicle lithium-ion batteries will jump 50% this year from 2020’s level to 223 gigawatt-hours, then double to 443 GWh in 2023. By 2027 demand is forecast to be 1.1 terawatt-hours, an eight-fold increase in just seven years. That will further push up prices for battery materials. Lithium will continue rising throughout 2021, according to Simon Moores, Benchmark’s managing director. Likewise, cobalt, graphite, copper and nickel “are definitely expected to rise and this won’t be a slow and steady process. We expect periods of severe volatility,” Moores says.
EVs are still a small market segment in the U.S., accounting for about 2% of new vehicle sales in 2020, but that’s about to change. Boston Consulting Group predicts electric vehicles could account for more than half of global passenger vehicle sales as early as 2026, four years ahead of its previous forecast.
“We’re in a weird phase in the world where, with the number of projects being announced, both new electric vehicle companies…and new Gigafactories, all of this is way outstripping our ability to project where the materials will come from,” Straubel says.
In addition to helping ease supply, Straubel’s company has the potential to mitigate the EV-industry’s dirty little secret: Electric vehicles aren’t as green as most drivers think. Some 19% of U.S. electricity is still generated by burning coal and mining for battery materials is a polluting business with notorious working conditions.
“Most consumers are only aware of the ‘clean’ aspects of electric vehicles,” Pamela Coke-Hamilton, executive director of the International Trade Centre, a joint agency of the United Nations Conference on Trade and Development and World Trade Organization, said in a July 2020 report. “The dirty aspects of the production process are out of sight.”
Much of the lithium, for example, comes from Australia and salt flats in Argentina, Bolivia and Chile, where water is in short supply. Mining in South America’s mountainous Andean regions means pumping large amounts of groundwater, cutting the supply for farmers and herders, according to a 2020 study by the United Nations. The same study points out that cobalt is heavily sourced from the Democratic Republic of the Congo, often from “artisanal” mines employing tens of thousands of children. Dust from nickel mines can contain uranium and other toxic materials linked to respiratory diseases and birth defects.
Traditional mining is also inherently inefficient, Straubel says. “The entire flow sheet of that industry is you find a deposit, dig it up, refine it and then dispose of it. That fundamentally is a one-pass through kind of activity. … It’s not sustainable.”
Straubel originally conceived of Redwood as a Tesla side project and discussed it with Musk. “He was supportive and enthusiastic about it–as long as it’s not a distraction for everything that we had to get done,” he says. Tesla has its own recycling plans, but they’re geared toward supporting its operations and aren’t currently a top concern. “Recycling batteries from a four- or five-year-old Model S is low down the priority list.”
“Most consumers are only aware of the ‘clean’ aspects of electric vehicles. The dirty aspects of the production process are out of sight.”
— Pamela Coke-Hamilton, executive director, International Trade Centre
He and Musk bonded over a shared interest in electric aviation when they met in 2003. Straubel was working at Volacom, a Los Angeles-based aerospace startup he cofounded to create a hydrogen-electric power system for high-altitude aircraft. He joined Tesla in 2004 as chief technology officer, earning dozens of patents for its electric motors and battery power system. Musk became synonymous with the Tesla brand, but the quiet Straubel created much of its core technology.
Musk summed just how big the low-key engineer’s contribution was when he announced Straubel’s surprise departure in a July 2019 earnings call. “I’d like to thank JB for his fundamental role in creating and building Tesla. If we hadn’t had lunch in 2003 Tesla wouldn’t exist, basically.”
In 2020, Redwood’s first full year of operation, it processed 10,000 tons of scrap from Panasonic and Envision AESC and electronic waste containing batteries from Amazon. Straubel expects Redwood to process double that in 2021, as it’s also begun sourcing used batteries (and solar panels) from ERI, North America’s biggest e-waste recycler and electric bus builder Proterra.
John Shegerian, ERI’s founder and executive chairman, said his Freno, California-based company was struggling to figure out what to do with the surge in lithium-ion batteries it was collecting in used electronics from companies like Best Buy, Samsung and Boeing, municipalities like New York and Los Angeles and various federal agencies.
“As things got smaller, and they got rid of power cords, lithium-ion batteries became the way to power all the small gadgets. And then they became a big problem for us,” Shegerian says, because his company isn’t able to recycle them itself. “When I met JB, we hit it off right away. He showed me his technology, what he was doing and shared his vision with me. The first meeting was in Carson City last year. Then he came over a week later and saw all we had created and our volumes of batteries–we’re the biggest aggregator of batteries in America.”
Straubel was eager to take both those used lithium-ion batteries–as well as old solar panels–off ERI’s hands to recycle them at Redwood. “It was a match made in heaven,” Shegerian says.
Those batteries help fill the semi-trucks that arrive daily at the company’s Carson City facility. Once there the e-waste is manually sorted for processing. Redwood has a proprietary hydro-chemical process to separate out various metals, with some batteries undergoing intense heating in ovens. All the alloy collected then goes through a chemical process to convert it to usable material. (Flammable battery electrolyte is burned under contained conditions to ensure toxic fumes aren’t released.) “We basically disassemble those things chemically and start to separate out the useful materials and use those as the building blocks to manufacturing.”
Redwood isn’t alone in looking to battery recycling as a lucrative business. Canadian rival Li-Cycle Corp. has plans of its own to recover used and scrap batteries and big automakers including Volkswagen are planning to recover and reuse electric car batteries.
“Energy and transportation are both getting a massive amount of traction and attention on sustainability,” Straubel says. “The materials and extractive industries haven’t quite seen that same attention around sustainability yet. I believe it’s coming. It has to come.”