The Elements of Innovation Discovered

Strong Redwood attracts $1B investment

Investors help grow forest of domestic recycling infrastructure Metal Tech News - September 6, 2023

From a small sprout to a mighty tree, Redwood Materials Inc. may share its roots with the Tree of Tesla but has grown into a pillar of stability in the realm of recycling amidst a time when electric vehicle battery materials are becoming increasingly difficult to source. This battery and e-waste startup's vision of creating a domestic supply through recycling has drawn nearly $2 billion in new investment to expand its operations in the U.S., spreading its own "Sequoian" roots far and wide.

Founded in 2017 by Tesla co-founder JB Straubel, this forward-thinking recycling company's valuation rapidly grew from $3.8 billion in September 2021 to roughly $5 billion today.

Led by a veteran in the electric industry, Straubel spent 15 years at Tesla, not just as a co-founder but also as the chief technology officer, where he built one of the best engineering teams in the world and led cell design, supply chain, and even the development of the first gigafactory concept through the production ramp of the Model 3.

Either due to insider perspective, information, or plain insight from the company that essentially kickstarted the global transition to full electric vehicle production, Straubel made the move to create a company designed to recycle and reuse the materials needed for what he helped build for nearly two decades.

Hindsight suggests this was not a difficult decision, as perhaps the largest lithium and cobalt mines (along with nickel, manganese, and graphite) "mines" in the western hemisphere can be found in the junk drawers, closets, and garages of America.

Redwood recycling

Simply put, Redwood aims to recover materials from outdated, obsolete, or discarded consumer electronics – which can be sustainably broken down to their raw metals nearly infinitely – to significantly decrease society's reliance on newly mined materials.

Although the math could probably be hashed out, the brief idea at the sheer volume of consumer-level electronics over the last thirty years – phones, computers, televisions, indoor and outdoor appliances, video game electronics, toys, toiletries, the list could go on with microchips, batteries, transistors, and every other aspect that people have used to create electronic devices.

According to the company's website, "If you have old lithium-ion batteries or e-waste, we encourage you to send them for recycling! Redwood accepts phones, laptops, tablets, power tools, electric toothbrushes, wireless headphones and any other rechargeable device with a lithium-ion battery."

While even that list does not begin to cover the extent of electronic components used in day-to-day living, it is a healthy start to not only clean up the mess of e-waste but to also help alleviate the pressure on mining companies.

To date, Redwood combines recycling, refining, and remanufacturing to return battery materials to local manufacturers.

While it is possibly a decade or more away from seeing end-of-life EV batteries return to circulation in viable volumes, having the facilities to break them down and then rebuild those metals into cathode and anode products is, so far, the most sustainable method for meeting the world's carbon-free goals.

Redwood has been moving rapidly in the U.S. to address the nation's 2030 electrification goals. However, the US is not the only market with similarly aggressive ambitions that also relies heavily on a convoluted, overseas supply chain with high CO2 emissions.

Today, Europe is the fastest-growing EV market globally, with an increasing commitment from automakers – 1,000 gigawatt-hour battery cell production is planned in the European Union to support EV sales that are expected to account for nearly 30% of total passenger cars by 2025.

Redwood hopes to localize global battery supply on each continent, as it is their belief that shortening battery materials supply chains will be critical to driving down costs and increasing the sustainability of EVs and clean energy storage.

Domestic disaster

Recycling in the U.S. has been, for the most part, broken.

In 1960, Americans generated roughly 2.68 pounds of garbage a day, around the time when modern recycling began to take shape into what it is known as today. According to Hazardous Waste Haulers Environmental, this number has nearly doubled to 4.51 lb of trash each day.

While many citizens dutifully sort their refuse into their respective receptacles, much of that does not actually end up being recycled.

Firstly, many recyclables become contaminated, either due to incorrect sorting at source or downstream. This immediately prevents large batches of materials from being recycled, as the costs of sterilizing have historically been too high to accommodate the practice. Furthermore, many of the materials used in consumer products can't be processed at general recycling facilities.

Secondly, many items that are collected, such as plastic straws and bags, cutlery, or various food containers and takeout boxes, cannot be recycled – usually ending up being incinerated, deposited into landfills, or washed out into the oceans.

While incineration is sometimes used to produce energy, waste-to-energy plants have long been associated with toxic emissions. Landfills also pose risks, such as carbon dioxide, methane, volatile organic compounds, or other pollutant emissions. And nothing else need be said of the harm of oceans drowning in plastic waste.

Not just imports; trash exports

For decades, China has been responsible for and has handled the recycling of almost half of the world's discarded materials – because its manufacturing sector was booming and needed these materials to feed it.

In 2016, the U.S. exported roughly 16 million tons of plastic, paper, and metals to China. In actuality, 30% of these mixed recyclables were ultimately contaminated by non-recyclable material, ended up never recycled, and polluted China's countryside and oceans.

An estimated 1.3 to 1.5 million metric tons of plastic found its way into the ocean off China's coast each year.

However, in 2018, China's National Sword policy banned the import of most plastics and other materials that were not up to new, more stringent purity standards. Hence, the U.S. began to send its waste to other countries, shipping approximately 68,000 containers to Malaysia and Thailand.

When these countries began to enforce their own bans on imported waste, the U.S. diverted its waste to Cambodia, Bangladesh, Ghana, Laos, Ethiopia, Kenya, and Senegal – countries with cheap labor and lax environmental rules.

Today, the U.S. still ships over 1 million metric tons of plastic waste abroad, often to countries already overwhelmed by it. This has led experts to estimate that 20 to 70% of plastic intended for recycling overseas is unusable and ultimately discarded.

One study found that the plastic waste exported to Southeast Asia resulted in contaminated water, crop death, respiratory illnesses due to toxic fumes from incineration, and organized crime.

Accountability has come a-knocking

Without the Chinese market for plastic – as well as for some types of cardboard, paper, and glass – the U.S. recycling industry was upended.

"The economics are challenging," said Nilda Mesa, director of the Urban Sustainability and Equity Planning Program at the Earth Institute's Center for Sustainable Urban Development. "If there is not a market for the recycled material, then the numbers do not work for these facilities as well as cities, as they need to sell the materials to recoup their costs of collection and transportation, and even then it's typically only a portion of the costs."

As a result, U.S. processing facilities and municipalities have either had to pay more to recycle or simply discard the waste.

In 2017, Stamford, Connecticut, made $95,000 by selling recyclables; in 2018, it had to pay $700,000 to have them removed.

Bakersfield, California, used to earn $65 a ton from its recyclables; after 2018, it had to pay $25 a ton to get rid of them. Franklin, New Hampshire, had been able to sell its recyclables for $6 a ton; now, the transfer station charges $125 a ton to recycle the material or $68 a ton to incinerate it.

Municipalities that couldn't afford to pay more have cut back on their recycling programs. Over 70 ended curbside recycling (though several have been reinstituted after public protests), and many drop-off sites closed; some programs increased costs to residents while others limited what materials they would accept.

Because U.S. recycling was dependent on China for so many years, domestic recycling infrastructure was never developed, so there was no economical or efficient method to recycle when the market disappeared.

"The way the system is configured right now, recycling is a service that competes – and unsurprisingly often loses – for local funding that is also needed for schools, policing, et cetera," said Stephanie Kersten-Johnston, an adjunct professor in Columbia University's Sustainability Management master's program and director of circular ventures at The Recycling Partnership. "Without dedicated investment, recycling infrastructure won't be sufficient. In addition, we need to resolve the simple math equation that currently exists – when it's cheap to landfill, recycling will not be 'worthwhile' so we need to start to recognize what landfill really is: a waste of waste!"

Making the situation more complicated – the U.S. does not have a federal recycling program.

"Recycling decision-making is currently in the hands of 20,000 communities in the U.S., all of which make their own choices about whether and what to recycle," said Kersten-Johnston. "Many stakeholders with many different interests converge around this topic and we need to find common ground and goals to avoid working against one another. That means companies coming together with communities, recyclers, haulers, manufacturers and consumers to try to make progress together."

Waste is wasted

"If you can't grow it, you have to mine it," an old miner's credo but no less true. However, roadblocks exist that continue to impede resource development from this front.

With the current stranglehold by critical minerals on the renewable energy sector, the war room is now a flurry of paperwork, shouting, and probably coffee.

The time of buying from other countries has essentially passed, as allied nations have their own rooms abuzz with panic, and with "adversarial countries" off the table, the list is further narrowed.

That leaves decades of waste in landfills as one of the most immediately accessible options to recover resources.

According to the Environmental Protection Agency, the total generation of municipal solid waste (MSW) in 2018 was 292.4 million tons or 4.9 lb per person per day. Of the MSW generated, approximately 69 million tons were recycled, and 25 million tons were composted.

Together, almost 94 million tons of MSW were recycled and composted, equivalent to a 32.1% recycling and composting rate. An additional 17.7 million tons of food was managed by other methods, while another 35 million tons of MSW (11.8%) were combusted with energy recovery methods.

More than 146 million tons of MSW were landfilled – 50%.

To tie in context, EPA refers to trash as various items consumers throw away after they are used. These include bottles and corrugated boxes, food, grass clippings, sofas, computers, tires and refrigerators. However, statistical MSW does not include everything that may be landfilled at a local level, such as construction and demolition debris, municipal wastewater sludge, and other non-hazardous industrial wastes.

Of the 292.4 million tons of MSW, 2.7 million tons were estimated to be consumer electronics.

According to Rice University's Baker Institute for Public Policy, consumers in the U.S. currently own more than 3 billion electronic products, resulting in a substantial volume of discarded and obsolete devices.

These consumer electronics represent only a small subset of the rapidly growing amount of electronics reaching their end of life; businesses and governments are also major users of electronic devices with high turnover.

The subsequent electronic waste, known commonly as e-waste, is the fastest-growing component of the municipal waste stream in the country. Altogether, the U.S. contributes approximately 12% of the world's e-waste.

So, what must be done?

Standing tall for recycling

Locking in an earlier $2 billion loan commitment from the U.S. Department of Energy, Redwood aims to use its latest funding to expand e-waste recycling operations in the U.S., including in and beyond its facility in Carson City, Nevada – also announcing plans to build a Battery Materials Campus outside Charleston, South Carolina.

For its new growth funding round, Goldman Sachs Asset Management, Capricorn's Technology Impact Fund and other unnamed funds advised by T. Rowe Price Associations led the deal, according to Redwood.

The Series D of equity funding now brings the company's total capital raised to nearly $2 billion.

OMERS, heavy equipment maker Caterpillar Inc., Microsoft's Climate Innovation Fund and Deepwater Asset Management also invested in the round.

With approximately $4 billion toward recycling infrastructure by a company with ties to an industry shaker such as Tesla, it can be imagined that Redwood means business.

During a 2022 interview with Straubel, Associated Press journalist Tom Krishner asked the former Tesla executive and recycling visionary whether Redwood was a few years ahead of its time in recycling batteries, considering that the transition to EVs was still in its infancy.

"I actually thought we were a few years early when we started this. But I've been really shocked at how many other sources of current lithium-ion battery materials there are to recycle that weren't being addressed," replied Straubel. "We've actually had more feedstock than we can even process in the first few years of our ramp up. Just based on a combination of production scrap from the lithium-ion manufacturing process, as well as a whole diversity of consumer lithium-ion batteries, things like lawnmowers and cell phones and toothbrushes, there is a lot of material."

With partnerships for recycling from Ford, Panasonic, and Volkswagen, Redwood certainly provides the shade needed to remind consumers that now, more than ever, recycling is indispensable and will become the renewable methodology of the future, and with the funding in place, it can be surmised that in the not so distant future, the commonplace red, blue, or green recycling bins may become Redwood bins at curbside.


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