For comparison a project in NZ recently finished cost 550 usd / kwh (which also includes site, etc)

I wonder if there will be a tipping point where people start defecting from the grid, making it more expensive for people still on the grid, giving them a bigger incentive to defect.

With flow batteries there are definitely differences since the power and energy components of the system can each be scaled independently from each other. Ie need more total energy then just expand the amount of liquid electrolyte storage you have.

The hours designation is the MWh / MW i.e. how fast you can empty the battery into the grid at full throttle.

The economics comes in because batteries are expensive and you want to target the highest and lowest prices during the day, charging and discharging totally to maximize revenue via price abitrage. A 1 hour battery is going to be shaving the very peak prices of each day soaking up solar at noon and displacing expensive gas peaker plants in the evening.

As the battery MWh gets bigger, but not the ability to put it all on the grid, that implies you'll be charging and discharging for 4 or 8 hours each day which means you'll be paying and getting paid closer to the average prices in both directions.

It only works economically if the battery is itself cheaper (and/or there's more renewables pushing down prices for longer periods of the day)