DOE Announces Conditional $2 Billion Loan For Redwood Materials Nevada Expansion

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Redwood Materials, the battery recycling company founded by former Tesla CTO JB Straubel, said this week it has received a conditional commitment for a $2 billion loan from the DOE’s Loan Program Office to support the phased construction of its battery recycling facility in McCarran, Nevada. The loan is structured to allow Redwood to unlock the funding as it completes the construction and expansion of its first battery materials campus. The company will also build a second facility in South Carolina.

In its announcement about the loan to Redwood, the DOE said, “Once fully operational, the project would be the first domestic facility to support production of anode copper foil and cathode active materials in a fully closed loop lithium ion battery manufacturing process by recycling end of life battery and production scrap and re-manufacturing that feedstock into critical materials. Redwood Materials is expected to create approximately 3,400 good paying construction jobs and employ approximately 1,600 full-time employees, including labor, technical staff, and on-site management. In addition, Redwood Materials will rely on a construction workforce comprised of union, Minority and/or Woman-Owned Business Enterprises in the construction of the project.”

Redwood Materials Conditional Loan

Jigar Shah, the Director of the DOE’s Loan Programs Office, said, “In order to meet the needs of the rapidly growing EV market, the United States will need to expand battery recycling capabilities as well as grow our domestic capacity for producing battery precursor materials. By lowering the cost of the critical materials for lithium ion batteries using recycled materials, electric vehicles can become more accessible to lower income communities.

“The domestic production of these battery components is paramount to our national security, building our supply chain, and strengthening our economy long term. Shifting the domestic critical materials supply for lithium ion batteries to meet future demands using recycled materials will help decouple U.S.-based battery production from a shock prone international supply chain and will enable the growth of reliable, large scale U.S.-based EV battery cell production.”

Over the next decade, there will be extraordinary investment to scale domestic battery cell production in the United States, the company said. This investment is critical to keeping the US at the forefront of manufacturing and job creation, meeting our clean energy and sustainability goals and ensuring we strengthen our supply chains and lessen our reliance on foreign battery components, the company says.

Redwood Materials Mission

The two most essential and valuable components in a battery are the anode and cathode. The cathode contains all the critical metals in a battery — lithium, nickel, and cobalt — and requires a complex manufacturing process and functional specification integral to the performance and safety of an electric vehicle battery. The anode contains copper and graphite and is primarily responsible for a battery’s charging performance. Together, these components amount to nearly 80% of the materials cost of a lithium-ion battery.

“Today, these components are manufactured entirely overseas, predominantly in Asia. Without domestic production, U.S. battery cell manufacturers are estimated to offshore more than $150 billion in economic value for anode and cathode components by 2030. Redwood is committed to solving this by manufacturing anode and cathode components in the U.S. and producing them from an increasing amount of recycled content.”

Redwood says it has been working closely with the Loan Programs Office for more than a year and has undergone an extensive diligence process that closely examined its technology, ability to repay the loan, and product demand, among other factors. The recycled battery materials it produces will permit battery and automotive manufacturers to meet the stringent mineral and battery component requirements mandated by the Inflation Reduction Act. These policies support the localization of the battery supply chain and ensures the American battery industry has the necessary materials needed to successfully transition the US to a clean energy and clean transportation future in the most sustainable, secure, and cost-effective manner.

“DOE’s support for this project represents a critical milestone in the United States’ commitment to establishing a domestic battery supply chain rooted in manufacturing and American innovation. By localizing this critical supply chain and producing anode and cathode components at a gigafactory-scale in the US for the first time, Redwood is addressing perhaps the most important supply chain need in electrification and ensuring that the United States can deliver on its clean energy and sustainable transportation plans,” the company says.

Redwood Materials will produce approximately 36,000 metric tons per year of ultra-thin battery grade copper foil for use as the anode current collector and approximately 100,000 metric tons per year of cathode active materials. Anode copper foil and cathode active material are the two most critical and valuable components of lithium-ion battery manufacturing for electric vehicles, the DOE says.

Onshoring Battery Materials

At the present time, nearly all anode and cathode production supporting US battery cell manufacturers occurs in Asia. Onshoring the production of these components is critical to America’s energy independence while ensuring the long term success and sustainability of an advanced battery manufacturing industry here at home. This latest conditional commitment comes as the EV market in America is expected to grow substantially along with US automakers and component suppliers working to lead the world in electric vehicle manufacturing. The annual share of battery-electric vehicles is expected to rise from about 2% in 2020 to 35% by 2030, the DOE said in its announcement of the loan.

“While this conditional commitment demonstrates the Department’s intent to finance the project, several steps remain for the project to reach critical milestones, and certain conditions must be satisfied before the Department issues a final loan,” the DOE said, without elaborating on what those conditions might be.

Redwood Materials already has a pilot line up and running for production of anode copper foil in Nevada. Its goal is to support the production of more than 1 million EVs per year, which could help drivers avoid an estimated 3.5 million tons of carbon dioxide and other tailpipe emissions each year, the DOE says. The company is also considering a recycling facility in Europe.

CNBC reports that while Tesla may have been the birthplace of Redwood Materials and is a partner of the company today, it could compete with the Redwood and other battery recyclers in the future. In its 2022 annual financial filing with the SEC, Tesla said, “We have agreements with third party battery recycling companies to recycle our battery packs and we are also piloting our own recycling technology.”

The Takeaway

Spy balloons launched by China recently have only exacerbated the desire to uncouple America’s electric transportation and renewable energy manufacturing capability from Chinese sources. Xi Jinping needs to understand that actions have consequences. If he didn’t understand that before, he soon will.