General Motors and Redwood Materials are joining forces yet again, this time with the intent to build energy storage units made out of recycled EV batteries.

The two companies signed a non-binding memorandum of understanding to build energy storage out of US-manufactured batteries, as well as “second-life” EV packs from GM’s vehicles. The announcement comes on the heels of Redwood’s decision to move more aggressively into the energy storage business with the creation of a new division. The company’s first project will be building a storage system for an AI development center in California.

Battery storage systems play a crucial role in balancing energy for the grid. These systems can store energy from a variety of sources, including renewables like wind and solar, releasing it when needed, which helps save power during periods of low demand.

The rise of AI is putting increasing pressure on the grid, in the US and globally. The steepest rise in global electricity demand is coming from new data centers in the US and China, as well as the manufacturing of electric vehicles, batteries, solar panels, and semiconductors.

GM has a preexisting partnership with Redwood to recycle scrap from its battery manufacturing facilities in Warren, Ohio, and Spring Hill, Tennessee. The automaker says this new deal will help power its ambitions to expand beyond EV batteries and into grid management and energy storage. GM has its own energy division that sells power banks, charging equipment, solar panels, and management software to residential and commercial customers.

“The market for grid-scale batteries and backup power isn’t just expanding, it’s becoming essential
infrastructure,” said Kurt Kelty, GM’s VP of batteries, propulsion, and sustainability, in a statement. “Electricity demand is climbing, and it’s only going to accelerate. To meet that challenge, the U.S. needs energy storage solutions that can be deployed quickly, economically, and made right here at home. GM batteries can play an integral role.”

Redwood Materials was founded in 2017 by Tesla’s former chief technologist JB Straubel. In addition to breaking down scrap from Tesla’s battery-making process with Panasonic, Redwood recycles batteries from Ford, Toyota, Nissan, Specialized, Amazon, Lyft, Rad Power Bikes, Lime, stationary storage facilities, and others. The company also produces cathodes at a facility in Nevada, and eventually at its under-construction site in South Carolina.