Energy storage is having a moment — but the batteries that are taking off today only have enough juice to provide a few hours of grid power. Developers technically could stack up more batteries for longer-term storage, but that gets prohibitively expensive. For a renewables-dominated grid to ride out days of poor solar production or even just an entire night, a breakthrough in cost-effective, longer-term storage is needed.
Over the last couple decades, venture capitalists have recognized this transformative possibility and heaped billions of dollars into the sector known as long-duration energy storage, or LDES. They have little to show for their efforts. The startups that haven’t gone bankrupt have built some factories and early installations, but have not built any particularly large-scale projects, at least in the U.S.
A few weeks ago, I saw something in the desert outside Reno, Nevada, that got me thinking the investors and startups may have been barking up the wrong tree all along.
Former Tesla Chief Technology Officer JB Straubel unveiled a surprising new project in June at the Tahoe campus of his lithium-ion recycling company, Redwood Materials. Instead of ripping apart old electric vehicle battery packs, his engineers arranged them across a patch of desert and hooked them up to an adjacent solar field. This assemblage now stores so much clean power that it can run a small on-site data center, rain or shine, night or day.
In other words, instead of inventing a brand-new technology tailored for long-term storage, Redwood made it way cheaper to stack enough time-tested lithium-ion batteries to accomplish that goal.
Unveiling this new business line, Straubel wasn’t just diversifying his revenue streams. He was staking claim to the long-duration storage market writ large.
“We’re confident this is the lowest-cost storage solution out there,” Straubel said. “Not only just lower than new lithium-ion batteries, but lower than compressed-air energy storage, lower than iron-air, lower than a number of these other ones that carry a little more technology risk.”
As he spoke, Straubel pointed at a bar graph depicting the costs of those types of LDES technology, as well as thermal storage, pumped-hydro storage, and flow batteries. Naturally, the chart showed his used batteries clocking in cheaper than all of them.
It’s a big claim. Second-life battery development is even newer than the LDES field; prior to Redwood, only a handful of companies, like B2U Storage Solutions and Element Energy, had built large-scale second-life storage plants, and those were just in the last few years. The sector has a lot of work to do to convince customers and financiers that the gently used battery packs can be trusted to hold up over years of service. And with new lithium-ion packs getting ever cheaper, the discount offered by used batteries may prove tenuous.
Still, Straubel’s first operating project, which holds 63 megawatt-hours of energy storage, is already bigger than any novel battery installation in the U.S. If Straubel takes this concept mainstream, it could revolutionize the arms race for long-duration storage — and radically improve the odds of running the economy on a largely renewable grid.
Starting off bigger and cheaper than LDES competition
At the June event, Straubel essentially asserted that his band of desert engineers, in just a few months of tinkering, has outmaneuvered the researchers and companies working on long-duration for decades.
That deserves some scrutiny — but even pinpointing the costs of the competition is challenging.
“There are a lot of flavors of long-duration storage. What all of them have in common is that actual deployments have been very limited up until now,” said Pavel Molchanov, who analyzes cleantech companies for financial services firm Raymond James. “To make any clear-cut statements about which particular flavor is cheaper than any other would be quite premature.”
Redwood says its second-life battery installations cost less than $150 per kilowatt-hour today, for systems that can deliver power over 24 to 48 hours. The company’s datapoints on the prices of other battery types were drawn from BloombergNEF’s 2024 analysis of the LDES field, augmented with Redwood’s internal estimates for what a complete iron-air system would cost today, since that technology isn’t yet commercially available.
Iron-air is under development, most famously, by Straubel’s former Tesla Energy compatriot Mateo Jaramillo at Form Energy, a VC darling that’s raised more than $1.2 billion to date. Redwood calculated iron-air costs at higher than $150 per kilowatt-hour, but Form has stated its intentions to sell batteries below $20 per kilowatt-hour when its factory reaches full production scale.
It’s worth noting that not all these technologies are directly comparable, because companies design and market them at different durations based on their technical sweet spots. If a technology works especially well at, say, 12 hours duration, the company might not even sell it for 48-hour configurations.
“Part of the issue with comparing long-duration storage systems and prices is that every company will give you their price point for a different duration,” said James Frith, a longtime battery analyst now at VC firm Volta Energy Technologies. “Then you’re thinking, how do I normalize this? How do we get to a base point that is comparable amongst the technologies?”
Epistemological issues aside, Redwood accurately diagnoses that the LDES sector’s struggle to deliver real installations at super-low cost leaves an opening for new competitors.
Brand-new lithium-ion batteries aren’t economically viable at longer durations, though their limits keep expanding as battery prices fall.
“Lithium-ion storage systems with longer durations require more battery cells, making the system capital-intensive and less economically competitive compared to emerging long-duration storage alternatives,” said Evelina Stoikou, head of battery technology and supply chain research at BloombergNEF.
Pumped-hydro and compressed-air energy storage work for longer durations, but they are huge, billion-dollar infrastructure projects of the sort that don’t get built anymore in the U.S. Flow batteries — which store energy in tanks of liquid electrolytes — have been kicking around for decades with some success in China, where they benefit from government favor. In the U.S., they’ve not gained much traction.
Meanwhile, many LDES startups have made the strategic error of designing exotic storage solutions to eke out a few more hours, under the incorrect assumption that lithium-ion would never be able to compete at four, then six, and then eight hours.
Take ESS, which has developed an iron-based flow battery since 2011: Despite leaning into “long-duration” branding, the company was selling an Energy Warehouse with a bit over six hours duration, and only this year announced a “strategic shift to the 10+ hour product.” (Its board members had to throw in more cash last month to sustain the company through that shift, and gamely agreed to forgo personal compensation for the year.)