Battery recycling startup Redwood Materials reached a landmark deal last month to supply enough cathode material to Panasonic to power 1 million electric vehicles.

When Panasonic’s Kansas battery factory starts production in 2025, it will be the first time cathode material has been produced at gigafactory scale in North America and used in U.S. battery cell manufacturing, according to Redwood Materials. And that’s just the beginning of the startup’s plans. By 2030, the Carson City, Nev., company projects it will produce enough anode and cathode material to supply 5 million EVs.

Redwood Materials is the brainchild of JB Straubel, the longtime chief technology officer at Tesla who left to focus on his recycling startup in July 2019. Long before others, Straubel foresaw a looming shortage of battery materials in the fledgling electric-vehicle era. He posited that recycling was one way to narrow the gap. Today, Redwood Materials is working with the likes of Panasonic, Toyota, Volkswagen, Ford and Volvo on a variety of projects.

Straubel, 46, appeared on the Sunday, Nov. 27, episode of “Shift: A Podcast About Mobility.” Here’s an edited excerpt of his conversation with Automotive News reporter Pete Bigelow.

Q: What is the scope of the agreement with Panasonic to supply recycled cathode material for its planned battery factory in Kansas?

A: It’s a huge deal for us. Panasonic has been a longstanding partner of ours quite a few years. We started with recycling some production scrap material from them at their gigafactory in Nevada. This really expands that relationship. This is a multibillion-dollar deal over several years. It’s a contractual commitment on both of our parts. We’re going to be working together arm-in-arm to make it happen.

What’s the significance of this agreement?

I’d say it is the biggest North American battery supply chain deal so far. There will be many more. There have to be. But this is the largest and the first gigafactory scale supply-chain deal. It also represents a true closed-loop example. You know, there’s been a lot of talk of closed-loop supply chains. It feels almost like a buzzword these days. But I’m really proud that this is moving these same critical metal atoms, nickel, cobalt and copper back to Panasonic in the form of products.

What are complications in creating this closed-loop supply chain?

It’s surprisingly technically hard. It shocked me and I’ve spent my whole career in technology and building difficult things.

Conceptually it seems straightforward. You take an old product, you make it into a new product. It is circular. But the actual steps that are involved along the way encompass almost everything that mining companies, metals-refining companies and also manufacturing companies have to do. So we’re kind of blending three different companies into one entity in order to close that loop.

Explain the battery itself.

In this shift to electrification, there is kind of a whole new vocabulary of components and parts that I think customers and enthusiasts need to get familiar with. If you look inside of a lithium ion battery, or any battery, really, it has, three or four main parts. There’s a cathode, there’s an anode, a separator, an electrolyte and a can. But the cathode and the anode do almost all the functional work.

They are what store the electrons in different chemical forms. And they are also what generally determine the energy density of the battery and lot of times its power and its safety as well. Cathode material makes up more than half the cost of the entire battery. It’s a really expensive single component. It contains all the cobalt and all the nickel, and it’s also where all the lithium is built into the battery when it’s first made.

How can costs be addressed through recycling?

The raw material cost inside of a lithium battery is continuing to climb. As this whole industry grows, the percent that is just the raw material commodity cost is growing every single year. So it kind of sets a floor on how cheap batteries using the same technologies today can get.

Unless we find a way to really reduce that material cost, that fundamental material cost, there isn’t a real clear path to go below a certain price in cost per kilowatt-hour. Now, recycling does have a way to do this. And instead of being one-to-one linked, you know, to needing to mine new metals and to find them geologically and open new mines, all of that is somewhat difficult and takes time.

How is the transition to electric cars going?

I think there’s a massive amount of awareness, discussion and momentum building around the transition. But if you look at just the very simple data of how many cars on the road are actually electric today, I think it indicates how far we have to go. We’re basically 1 percent through this industrial shift of a fleet. The whole industry is shifting and making good progress. But I do worry that it’s not happening perhaps in the most balanced of ways.

Is there a shortage in the raw materials needed to make the shift?

I think in the medium term we will see some shortages in these different materials. Ultimately, you know, there’s a lot of lithium on the planet. I don’t believe that’s a problem in the long term.

However, the rate that we need to ramp it up and the rate that we need to use it to make this transition happen will be a problem. And that’s where I think we’re going to see some challenges in the supply chain to come. There are probably some pretty big ones where there were under investments in mining or refining that have a long lead time to really get all the way to producing the right materials. And I’m not exactly sure how to fix that.

Ultimately, I think recycling is necessary in this whole market. In the short term, it will help alleviate some of that bottleneck and some of the materials need.

But it clearly can’t provide all of them. You can’t recycle a product that doesn’t exist yet. It is something where recycling every year will play a bigger and bigger role until the end state, where it’s providing the vast majority of all the materials needed. But it will be several decades between here and there.

You led development of the first gigafactory during your tenure at Tesla. Is that when your ideas about supply-chain reliability and recycling took shape?

My thinking on this started to unfold when we went to larger scale at Tesla. It was clear — and I was lucky to have this front-row seat — to this problem shifting from technology integration in the car itself and the battery itself, making it work and demonstrating it could function, to one of organizing the whole supply chain and production chain to make millions of them. It took a massive amount of focus from the team at Tesla to pull that off, and it was really the Model 3 that was the high-volume platform.

Through that process, it became clear to me it had become a much bigger problem for the industry. It created some of my enthusiasm for figuring out how we could solve that in a cross-industry way.

Were you focused on the auto industry, or had you zoomed out to really understand the impact for the whole supply chain and environment as well?

It’s both those vectors. Within a single OEM, there’s so many things to do and demands on your time and capital. Recycling and thinking about integration of the supply chain is important but not usually at the top of the list. Being in a separate company, independent from OEMs, we’re able to aggregate what’s a lumpy and difficult supply stream — we’re using consumer laptops and batteries from electric vehicles — to achieve a higher economy of scale on incoming material and keep a closer focus on how we make the most environmental benefit in building that closed loop, with an eye toward the future. We’re architecting something that will unfold in its full relevance decades from now, and that’s part of the excitement for me.