In March, Tesla CEO Elon Musk tweeted that his firm could install and commission a storage system in South Australia within 100 days following a series of blackouts in the state over the summer months.
Tesla will supply its Powerpack system, which will be charged by Neoen's 309MW Hornsdale wind project, currently under construction.
"Confirming the commitment from Tesla CEO Elon Musk to deliver the battery within 100 days or it is free, it has been agreed between Tesla and the South Australian Government that the starting date for the 100 days will be once the grid interconnection agreement has been signed," the South Australian government said.
The system will be operational by December 2017 and will be the world's largest lithium-ion battery storage project in world, according to Tesla.
"This grid scale energy storage project is not only sustainable, but will help solve power shortages, reduce intermittencies, and manage summertime peak load to improve the reliability of South Australia's electrical infrastructure," the company said.
South Australia government premier Jay Weatherill said: "I'm thrilled with the selection of Neoen and Tesla, whose experience and world leadership in energy security and renewables will help South Australia take charge of its energy future.
"Battery storage is the future of our national energy market, and the eyes of the world will be following our leadership in this space."