Tesla Motors last night announced a new line of commercial and residential-grade batteries for storing electricity on site and to supplement power from the grid.

While the news was expected after Tesla CEO Elon Musk tweeted about the announcement last week, what did come as a surprise was the price: $3,500 for the new 10 kilowatt hour (kWh) Tesla Powerwall.

A smaller 7kWh Powerwall is also available for $3,000. The prices do not include an AC to DC power inverter and system installation.

Tesla Tesla Energy's new Powerwall home battery comes in 10kWh and 7kWh capacities and sells for $3,500 and $3,000, respectively.

"The fact that this is wall-mounted is vital, because it means you don't have to have a battery room... filled with nasty batteries. It means a normal household can mount this in their garage or on the outside wall of their house and it doesn't take up any room," he said. "It's designed to work very well with solar systems right out of the box."

During a press conference at Tesla's design studios in Hawthorne, Calif., Musk also announced Tesla Energy, the company that will produce both residential and commercial-grade battery systems.

Tesla Energy's new commercial-grade battery is called the Powerpack, and will sell in 100kWh modules for $25,000 each. Musk said the Powerpack can scale infinitely, even powering small cities.

"You can quickly make this into a gigawatt hour solution," Musk said. "We already have one utility that wants to do a 250 megawatt (mW) installation just using the Powerpack."

Combined with a relatively small number of solar panels, most on rooftops, battery systems could enable the world to eliminate its dependency on fossil fuel-generated electricity, Musk said.

"We have the handy fusion reactor in the sky called the sun. You don't have to do anything. It shows up every day and produces ridiculous amounts of power," Musk said.

For power backup or daily use

The 10kWh Powerwall is optimized for backup applications and the 7kWh battery is manufactured for daily use applications. Both can be connected to rooftop solar panels or the grid and both can provide backup power.

"It addresses all the needs. It gives you peace of mind, so if there's a cut in utilities you'll always have power, particularly if you're in a place that's very cold," Musk said. "You can actually go completely off grid. You can take your solar panels, charge the battery packs and that's all you use."

The battery systems can now be ordered on Tesla Motors' website and units will begin shipping in three to four months, Musk said. Musk, who is also chairman of SolarCity, the largest installer of residential solar power systems in the U.S., said price will be key to widespread adoption.

Tesla Tesla Energy's new Powerwall battery can now be ordered and will ship in three to four months.

Previous estimates by industry pundits had pegged a wall-mountable battery system from Tesla with 10kWh of storage capacity at $13,000 or more.

The consumer-grade Powerwall battery system comes in multiple colors and has a sculpted and slim profile - protruding just 7.5-in from a wall. The unit can be mounted inside or outside.

The Powerwall is about 51-in. x 34-in. x 7.5-in. in size, and comes in either 7kWh or 10kWh capacities. The battery can provide 2kW of continuous power and has a peak power rating of 3kW. It comes with a 10-year warranty.

Up to nine Powerwall battery units can be daisy-chained together on a wall to provide up to 90kWh of power.

The average U.S. household uses about 20 kWh to 25 kWh of power every day, according to GTM Research.

Tesla announced last year that it partnered with Panasonic to make its lithium-ion batteries in what it calls "Gigafactories," the first one of which is under construction in Reno, Nevada.

Tesla Tesla's Gigafactory under is under construction outside Reno, Nevada.

Ravi Manghani, a senior vice president at GTM Research, said the energy storage market is expected to grow at a "frantic pace" as policymakers and market operators continue to identify opportunities and costs keep coming down.

And, the entry of a well-known carmaker into the energy storage space will likely spur commercial and consumer interest in the market.

"Residential and commercial customers that were either unaware of or uninterested in energy storage, are more likely to look into energy storage, Manghani said.

SolarCity will also sell the Tesla battery systems. The Powerwall is 60% less expensive than a previous home battery product it had sold, the company said.

For businesses and government organizations, SolarCity will incorporate the new Tesla battery into its DemandLogic energy storage system, which combines an AC to DC converter and power management software that automates the discharge of stored energy to optimize savings on utility demand charges for customers.

"Using Tesla's suite of batteries for homes and businesses, SolarCity's fully installed battery and solar system costs are one-third of what they were a year ago," the company stated in a blog post. "We expect costs to continue to decline as manufacturing scales, and over the next 5-10 years, these cost reductions will make it feasible to deploy a battery by default with all of our solar power systems."

SolarCity will begin taking orders for the new energy storage systems today and expects to begin installations in October.

Tesla What the Tesla Gigafactory is expected to look like once it's completed.

The global energy storage market is expected to reach $50 billion by the year 2020, which represents a compound annual growth rate of 8% over the next five years, according to Lux Research.

Batteries in consumer electronics and electric vehicles represent the lion's share of the energy storage market. Residential energy storage systems will reach $1.2 billion by 2020, Lux stated.

While batteries will supplement electricity derived from utilities via the power grid system, in the near-to-mid-term future, storage doesn't cause grid defection.

Manghani said it's unlikely that homes will be running entirely on solar power and batteries. To get off the grid with the same level of reliability as the grid, will require a huge battery, Manghani said.

However, there are benefits that energy storage can provide today, including back-up power during outages and a reduction in peak demand charges for commercial customers, which typically use the most electricity during the day.

Batteries will afford "time-of-use shifting," where businesses can purchase their power at low retail prices or store excess solar generation and consume it during peak hours.

"Not a lot of residential customers are on time-of-use tariffs, so this particular benefit is open only to a small portion of residential customers," he added.

Tesla got scooped

Tesla's news last evening was undercut by an announcement earlier in the day by German battery maker Sonnenbatterie and U.S. solar panel installer Sungevity. The two announced a partnership to offer battery storage systems to commercial and residential customers.

While pricing for Sonnenbatterie and Sungevity's integrated battery system has yet to be finalized, John Ordoña, Sungevity's vice president of communications, said prices will start below $10,000.

Sonnenbatterie's storage systems use Sony's Fortelion lithium-ion cells with up to 10,000 charge cycles.

"By installing the storage system, customers will be able to bank any excess energy generated by their solar panels and store it for future use, such as at night, during peak pricing hours or when there is a power outage," the companies stated in their announcement.

Sungevity customers in the U.S. and Europe will be offered Sonnenbatterie's smart energy storage systems in the second half of this year.

"The system is then combined with panels, solar inverters and other components into one Sungevity Energy System that's installed at the customer's home or business. The purchase will be as easy and straightforward as it is to purchase one of our solar systems today," Ordoña told Greentechgrid.com.

Musk said Tesla's battery system technology and its operations for the Gigafactory will be open source, just as the company has done with its all-electric vehicle "Superchargers," which cut electric-vehicle charging time in half.

Musk referred to the Gigafactory as a product, not just a manufacturing facility, and together with other companies adopting battery and renewable energy technology, fossil fuel use for electricity can someday be eliminated, he said.

"We're not thinking of it in the traditional way people think of it as a factory ... what we're really designing in the Gigafactory is a giant machine," Musk said. "This is not something we think Tesla will do alone. There's going to need to be many other companies building Gigafactory-class operations of their own. We hope they do."