The electric car-maker Tesla recently launched a home lithium-ion battery system called Powerwall to back up solar systems and store power during low-cost electric usage periods, such as 3 a.m. While it’s not the Holy Grail dedicated solar energy users have been waiting for—a cost-effective and powerful system that could permanently remove them from the grid—it is one of the first home systems that’s affordable and has the potential to speed up the race for a better battery.


Tesla CEO Elon Musk told the media that current battery technology “sucks” and his lithium-ion battery offers a cheaper alternative to what’s currently on the market. While on the surface it appears he is right—installers are paying $3,000 for a 7 Kilowatt per Hour (kWh) battery and $3,500 for a 10-kWh battery—the projected cost to use the batteries is higher because an electrician or technician is required to install the system and convert the batteries from AC to DC. While the cost may be included in installation of SolarCity home solar systems, which have partnered with Tesla, most consumers will pay more to hook up the batteries to their solar systems or grid.


Even so, according to Nature magazine, Tesla is currently buying the batteries from Japan-based Panasonic at an estimated $4,000 per unit, which means they’re actually losing money on sales—at least until they complete their own battery factory in the United States. However, being first in the marketplace may be their ace in the hole when a better battery comes along, since they will have gained the trust and loyalty of first-adopters who drive sales in the tech arena.


For energy storage to be competitive with fuel-powered energy, it must not cost more than $150 per kWh, according to the U.S. Department of Energy. The Tesla battery costs $700 per kWh. Considering that most hybrid and electric cars also do not provide an acceptable return on investment until after five years of ownership (and with dropping fuel prices that’s less likely), it may not matter to some consumers who are motivated more by convenience, image and environmentalism than actual cost savings from the batteries.


For those who want to be off the grid—such as Doomsday preppers and survivalists—and people with medical equipment requiring back up, the batteries offer an alternative to gas-powered generators in case of an emergency. Also, they can buffer solar or wind energy generation systems that have intermittent power. The 10-kWh Tesla battery, with minimal usage, might last for five hours before running out of power.


According to Gizmodo magazine, in places like sunny northern India, where power outages on an overtaxed electrical grid are rampant, the batteries will appeal to wealthy consumers who want the convenience of overcoming brief blackouts. Also, in countries where electricity costs are astronomical, like Australia, Spain, Italy, Turkey and Brazil, the batteries may actually be more cost effective than elsewhere when used during peak price hours. Also, experts predict that in three to five years, the cost of the batteries will be a third of what they are now.


All over the world, college researchers are working on creating a more powerful, lower cost battery that has the potential to last longer, too. Tesla’s batteries have a 10-year warranty, which could be problematic in hot areas where they are stored in garages, one engineer pointed out, but the company is probably banking on the fact that people won’t use up the 1,000-cycle batteries before then. The goal, according to the U.S. Joint Center for Energy Storage Research, is to reach the 5X5X5 standard—five times more energy, five times cheaper in five years. In addition to researchers, battery companies and tech companies like Toyota, LG, Samsung and Hitachi are working on creating more efficient batteries.


According to Nature magazine, Stanley Whittingham, a researcher at Binghamton University, part of the State University of New York system, invented the concept of the Lithium-ion battery in the 1970s. He said many of the current experimental batteries using a variety of materials, like Lithium-Oxygen, won’t work because they lose power due to corrosive chemical reactions. However, one of the more promising efforts is being made at Harvard University by Michael Aziz, a materials scientist and his team, using cheap organic materials like quinones in a flow battery connection. The only question is whether it can be cost-effectively converted into a mass-produced product.


The first lithium-ion battery, introduced by Sony in 1991, has become 30% more efficient since then—lighter and more powerful—but getting beyond that point has been difficult for battery makers. Still, the sleek Tesla batteries have come a long way since the days of the lead acid battery Uninterruptible Back-Up Systems for home use, in which a 15-minute addition of energy cost a great deal more. For commercial users, Tesla will be introducing a much bigger 100 kWh battery for $25,000 each, which would likely be scaled up with multiple units in places like hospitals.


The stored energy market, now only a $200 million business, is expected to grow to $19 billion by 2017, according to IMS Research. California alone will be a major market for the Tesla company, which is based there, because in five years more than 50% of its energy is expected to be derived from solar power.