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The fundamentals of a compressed air energy storage ( CAES ) system are reviewed as well as the thermodynamics that makes CAES a viable energy storage mechanism. The two currently operating CAES systems are conventional designs coupled to standard gas turbines. Newer concepts for CAES system configurations include additions of heat recovery systems, air humidification, adiabatic CAES , hybrid, and isothermal systems, which are briefly discussed with respect to their underlying thermodynamics. The desired geological properties and constraint for large underground air storage systems are reviewed with special emphasis on geologic heterogeneity and the requirement of a thorough geologic site characterization. The financial considerations that are needed by managers who wish to consider the construction of a CAES system are presented and a variety of conditions where CAES systems are economically profitable are indicated.

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