Tesla announced Thursday that it will build a lithium ion battery storage system at a California utility substation that will have the largest output of any existing storage facility. Southern California Edison selected Tesla to construct the storage project in Riverside County, the company said.

In May, the California Public Utilities Commission mandated an accelerated procurement for energy storage. Southern California Edison, among other utilities, was directed to solicit a utility-scale storage solution that could be operational by December 31, 2016.

Last week, through a competitive process, Tesla was selected to provide a 20 MW/80 MWh Powerpack system at the Southern California Edison Mira Loma substation.

Upon completion, this system will be the largest lithium ion battery storage project in the world, according to Tesla. When fully charged, this system will hold enough energy to power more than 2,500 households for a day or charge 1,000 Tesla vehicles.

The system will charge using electricity from the grid during off-peak hours and then deliver electricity during peak hours to help maintain the reliable operation of Southern California Edison's electrical infrastructure which feeds more than 15 million residents. By doing so, the Tesla Powerpack system will reduce the need for electricity generated by natural gas.

The high cost of energy storage has been a factor limiting wider use of battery storage technology. Tesla and Southern California Edison did not disclose the cost of the battery storage system.