Even without that, batteries are a store of energy, not a source, and perhaps the machines had discovered some unknown laws of nature that involved intelligent biological creatures being the only way to store or transform some sort of energy currently unknown to man. That is no more or less far fetched than the machines and ships using some sort of antigravity capabilities to fly.
There are plenty of ways to explain the technology in the matrix that isn't completely ridiculous.
I honestly thought I'd read that CPUs were the original intention but the studios changed it to batteries but can't find any source now.
Some hint about it here[1] but no conclusive proof.
[1] http://scifi.stackexchange.com/questions/19817/was-executive...
Or maybe the implants he had worked as transmitter/receivers and he was picking up on the chatter between the machines. It could be part of the reason why he could control so much of the virtual world. Maybe all implants had some form of wifi and Neo's was just unusually strong. Why the wifi? So that they could be switched to a different pod without loosing their connection to the matrix.
One can just keep going and going with alternative explanations.
Using them as batteries reduced those numbers which is a plus, and meant the machines didn't have to build a new store of energy, and could use the existing humans.
(I also like Eliezer Yudkowsky's theory that the Laws of Thermodynamics are an in-simulation creation by the machines, and humans-as-batteries works according to the laws of the real universe.)
Humans are just too stupid/arrogant to believe it.
If we get a little bit too annoying or dangerous they just cull us the same way we cull foxes or bears attacking livestock. We are never really a threat to them. Especially if you consider that they are a million steps ahead of us given their intelligence.
A single AI being is more intelligent than the entire human race that has ever lived; there are millions of independent AI's in the machine society. Once you look at it this way it is laughable to think that humans have even a tiny chance against an entire society of AI entities.
We think we pose a threat the same way a bear thinks it posses a threat against an armed human. The bear may get lucky against a few humans but against the entire human species it has zero chance.
Also, given that the mind of an AI is just software they are virtually immortal. Every time humans "kill" a machine it is just a piece of hardware that is being destroyed. The mind is still intact. So yeah, as soon as a sentient AI comes into being, the fight will be over before it starts. We think we are intelligent but just look at how long it takes us to study for a career. An AI will be able to learn all of human knowledge in a virtual instant. We are doomed!
If you follow this line of thinking you can fill a lot of the plot holes in the movies.
The agents are just zookeepers.
Most likely than not each single being is completely independent from each other. For all we know it is only the "zoo" that is being affected. You know, the same way that a whole bunch of animals in a herd get an infection and die.
Planet earth is big, and by this point all of it is populated by AI beings. They are probably using fusion energy and traveling to the stars already. This whole thing is probably just an isolated incident.
For all we know this is by design to keep the humans from dying off of boredom. Or maybe and most likely this is just an experiment some curious AI is running the same way we run experiments with rats and mazes. Since they are virtually immortal they can run an experiment for hundreds of years.
It could be that the fall of human civilization happened millions of years ago. The problem with the skies is just the result of climate change or changes with the sun. Since the machines live in a virtual reality they don't care what is the environment on Earth.
Apparently this concept was far too difficult for test audiences to understand so it was scrapped.
"Humans are batteries when the sun goes out!" Is easy for people to understand.
"Human minds are computers but in order to use human minds as computers we need to make the matrix as a semi-corporeal realm, oh and this is why people like Trinity can do impossible things like jump really far because their minds are so powerful and actually used in the calculations of the matrix that they can impact it's outcome."
Was the part that was too complex.
The machines were harnessing the unused parts of the human brain to create a gigantic supercomputer, but one that was capable of intuitive leaps, blah, blah, blah, lost interest....double backflip scissor kick to the face. Whoa did you see that?
I really enjoyed this documentary on Philosophy and the Matrix - https://vimeo.com/53000177