"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", Weatherill said.
Tesla Energy, the electric automaker's energy storage unit, will deliver 100 megawatts of lithium-ion battery storage or it will be free.
"The cost of the contract has not yet been announced, but failing to deliver the project in time would cost his company "$50 million or more", Musk said.
South Australia Premier Jay Weatherill issued a statement Friday local time (Thursday in the United States) about the timeline for Tesla to finish building the system.
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In September 2016 South Australia suffered from an nearly entire state wide blackout due to severe storms damaging power transmission lines across the state. Tesla is also encouraging South Australians to install smaller Powerwall battery packs in their homes to act as backup power sources.
Musk first made the bid, and the 100-day commitment, in a tweet back in March.
Tesla recently completed an installation of a battery farm in California which has a capacity of 20 megawatts and is created to discharge 80 megawatt hours of electricity in four-hour periods. "And then discharge it when the cost of power production is high, and this effectively lowers the average cost to the end customer", Musk said at the press conference on Friday.
The commitment to Tesla's battery technology comes amid a bitter political fight about the future of energy in Australia.
The deal throws Tesla into the midst of a long-running political battle between advocates of clean energy, including the South Australian government, and critics of renewables who have blamed the state's use of wind power for a series of blackouts.