There are a number of factors accelerating the uptake of residential battery systems in Australia, these include: falling battery cost, increased energy prices and lower solar export rates. Given the new interest, it is important to analyse the optimal capacities of residential battery systems, for a standard Australian households. This paper contributes an extension to modelling techniques by considering NPV energy costs, 25 year solar lifetime, commercially available modular battery sizes and DOD limits. This paper presents an upper limit to battery cost below which the residential battery system is economically viable for the home owner; the results show that this is inversely proportional to the battery capacity. A battery degradation analysis is presented showing the trade-off between the money saved by installing the battery, the battery cost and the number of depth of discharge cycles and the frequency of discharge rate hours.