Compressed Air Energy Storage (CAES)

Opportunities enabled
Technology group
CTCN Keyword Matches

Energy storage provides a variety of socio-economic benefits and environmental protection benefits. Energy storage can be performed in a variety of ways. Examples are: pumped hydro storage, superconducting magnetic energy storage and capacitors can be used to store energy. Each technology has its advantages and disadvantages. One essential differentiating characteristic of the different technologies is the amount of energy the technology can store and another is how fast this energy can be released. This technology description focuses on Compressed Air Energy Storage (CAES).

What is Compressed Air Energy Storage (CAES) technology and how does it work?

The technological concept of compressed air energy storage (CAES) is more than 40 years old. Compressed Air Energy Storage (CAES) was seriously investigated in the 1970s as a means to provide load following and to meet peak demand while maintaining constant capacity factor in the nuclear power industry. Compressed Air Energy Storage (CAES) technology has been commercially available since the late 1970s. One commercial demonstration CAES plant has been operating successfully for over 24 years, and another has been operating successfully for 11 years. In addition, many other CAES plants have been investigated via siting, economic feasibility, or design studies (EPRI, 2002).

The basic functioning of Compressed Air Energy Storage (CAES) is explained in Figure 1, while the introduction image above shows an artist's rendering of a CAES plant integrated with a wind turbine farm. Essentially, the term compressed air energy storage outlines the basic functioning of the technology. In times of excess electricity on the grid (for instance due to the high power delivery at times when demand is low), a compressed air energy storage plant can compress air and store the compressed air in a cavern underground. At times when demand is high, the stored air can be released and the energy can be recuperated. 

Because low cost electricity is stored at low demand times, and electricity is created,  through releasing the stored energy, at high demand times at high prices, storing energy is not only motivated by environmental protection benefits, but is also strongly motivated by economic benefits the technology provides. In addition, the technology provides energy market support and socio-economic benefits. The essential components of a compressed air energy storage plant are illustrated as well in Figure 1.

Basic functioning of a Compressed Air Energy Storage facility developing countries energy storage energy efficiency

Figure 1: Basic functioning of a Compressed Air Energy Storage facility

The compressed air is often stored in appropriate underground mines or caverns created inside salt rocks. The ground surrounding the cavern needs to be as air-tight as possible, which prevents the loss of energy through leakage. Storage in mined caverns (caverns excavated specifically for compressed air energy storage) is used for large scale CAES applications and it takes about 1.5 to 2 years to create such a cavern by dissolving salt. However, in addition to large scale facilities, compressed air energy storage can also be adapted for use in distributed, small scale operations through the use of high-pressure tanks or pipes (APS, 2007)

In addition to large scale facilities, compressed air energy storage can also be adapted for use in distributed, small scale operations through the use of high-pressure tanks or pipes (APS, 2007). Figure 2 illustrates a small-scale application of compressed air energy storage. The process is essentially the same as for large scale compressed air energy storage technology, it is just that the reservoir is smaller and above ground. The smaller reservoir limits the amount of electricity that can be stored with small scale technology.


Figure 2: Illustration of a small scale compressed air storage system.

When the plant discharges, it uses the compressed air to operate the combustion turbine generator. Natural gas is burned during plant discharge, in the same fashion as a conventional turbine plant. However, during discharge, the combustion turbine in a CAES plant uses all of its mechanical energy to generate electricity; thus the system is more efficient. (Schoenung, 2001)

Feasibility of Compressed Air Energy Storage (CAES) and operational necessities

As mentioned, the CAES technology concept is more than forty years old. The first and longest operating CAES facility in the world is near Huntorf, Germany, The 290- MWe Huntorf plant has operated since 1978, functioning primarily for cyclic duty, ramping duty, and as a hot spinning reserve for the industrial customers in northwest Germany. Recently this plant has been successfully leveling the variable power from numerous wind turbine generators in Germany. In the U.S. a 110 MWe plant has been constructed near McIntosh, Alabama and has been in operation since 1991. A third CAES facility is being planned in Norton, Ohio, USA. This facility will be the largest ever with a 2700 MWe capacity which will compress air to 1500 pounds per square inch (psi) in an existing limestone mine some 2200 feet under ground.

Several other CAES plants have been designed and/or investigated but were not built for a variety of reasons (EPRI, 2002). Several examples are:

  1. During the Soviet era, a 1050 MWe CAES plant using salt cavern geology formations for the air storage was proposed for construction in the Donbas area of Russia. Undeground geological development of the air storage was initiated. However, when the Soviet Union collapsed, the construction was terminated.
  2. In Israel plans were developed for several CAES facilities, including a 3 x 100 MWe CAES facility using fractured hard rock aquifers.
  3. Luxembourg designed a 100 MWe CAES plant sharing an upper reservoir for a water compensation system with a pumped hydro plant located in a hard rock cavern at the Viendan site.
  4. Soyland Electric Cooperative, contracted for the construction of a 220 MWe hard rock based plant. Plant engineering and the cavern sample drilling/rock analysis was completed and all major equipment had been purchased when the project was terminated due to non-technical considerations.

While most projects were not completed, the examples above show that CAES technology is clearly beyond the developmental phase. In addition, the technology is capable of establishing large scale energy storage, ranging up to 1000 MWe. Table 1 illustrates the development phase of several energy storage technologies. The APS panel on public affairs (2007) recommends further research and development efforts in CAES technology in the fields of establishing additional demonstration projects and computer modeling (APS, 2007).

Table 1. Development status of several key energy storage technologies. Source: APS, 2007

Commercial Pre-commercial prototype Demonstration stage Developmental stage
Pumped hydro

Flywheels for power quality

applications at the consumer site

Lead-acid battery

NI-Cad battery

Flywheel (as load device)

Micro - SMES (as load

Zinc-bromine battery

Flywheel (as grid device)

Vanadium redox battery

Electrochemical capacitor
Lithium-ion battery for grid applications

SMES (as grid device)

Electrochemical capacitors

Other advanced batteries

As illustrated in Figure 3, CAES technology is relatively slow in discharging the stored power capacity, but has among the highest system power rating together with batteries and pumped hydro storage technologies.Therefore, the amount of energy this technology can store in a large scale system is among the highest of the energy storage technologies currently available. Being relatively slow in the discharge of the stored energy, this technology can provide energy market support up to several hours.


Figure 3: System power rating and discharge times of several key energy storage technologies. Source: APS, 2007

Operational necessities of Compressed Air Energy Storage (CAES)

Also illustrated in Figure 1, for a conventional CAES plant cycle the major components include (EPRI, 2002):

  • A motor/generator with clutches on both ends (to engage/disengage it to/from the compressor train, the expander train, or both).
  • Multi-stage air compressors with intercoolers to reduce the power requirements needed during the compression cycle, and with an aftercooler to reduce the storage volume requirements.
  • An expander train consisting of high- and low-pressure turboexpanders with combustors between stages
  • Control system (to regulate and control the off-peak energy storage and peak power supply, to switch from the compressed air storage mode to the electric power generation mode, or to operate the plant as a synchronous condenser to regulate VARS on the grid).
  • Auxiliary equipment (fuel storage and handling, cooling system, mechanical systems, electrical systems, heat exchangers).
  • Underground or aboveground compressed air storage, including piping and fittings. Undergound storage is often performed in aquifers or mined caverns, while aboveground air storage is executed within specially designed holding tanks.

Several key features and limitations of Compressed Air Energy Storage (EPRI, 2002).

  1. The CAES technology can be easily optimized for specific site conditions and economics.
  2. CAES is a proven technology and can be delivered on a competitive basis by a number of suppliers.
  3. CAES plants are capable of black start (further discussed below). Both the Huntorf and McIntosh plants have blackstart capability that is occasionally required.
  4. CAES plants have fast startup time. If a CAES plant is operated as a hot spinning reserve, it can reach the maximum capacity within a few seconds. The emergency startup times from cold conditions at the Huntorf and McIntosh plants are about 5 minutes. Their normal startup times are about 10 to 12 minutes

According to the 2002 EPRI study, the main reason for the currently limited market penetration of this technology is likely to be the lack of awareness of this option by utility planners. In addition, the underground geology is likely perceived as a risk issue by utilities. Moreover, very few engineers are aware of the fact that CAES sites are actually relatively common. The 2002 EPRI study notes that approximately 80 % of the United States contains suitable CAES sites. Due to these reasons, the market potential for CAES is not used to its full capacity.

Table 2 illustrates some of the common parameter ranges for CAES plants.

Table 2. key features of a CAES plant. Source: EPRI, 2002

Feature Parameter range
Space requirements A 100 MWe plant requires approximately 1 acre
Effective efficiency 85 %
Lifetime of the plant About 30 years
Maintenance requirements Same as a simple cycle combustion engine: about US$0.30/MWh generated
Environmental impact Minimal
Auxiliary equipment needs Water if wet cooling is used; no water if dry cooling fans are used
Power conditioning needs None

Status of Compressed Air Energy Storage (CAES) technology and its future market potential

As mentioned, several CAES facilities are already operational but several limitations are currently limiting the market penetration of this technology. However, the Compressed Air Energy Storage (CAES) technology future market potential is substantial. This is largely due to the fact that renewable energies are expected to realize an increasing market share in the future. Being intermittent sources, energy storage is an essential aspect for high penetration rates of technologies such as wind and solar energy.

The APS (2007) study notes that CAES seems to be a natural partner to the wind farms currently under development. This is due to the characteristics of CAES in that it can operate on a short enough time scale to smooth out fluctuations in the energy grid caused by wind fluctuations, in that it meets the storage capacity required by wind farms, and that the technology is applicable more uniformly across the countries compared to pumped hydro storage (which requires elevation). In addition, the APS (2007) study notes that the CAES technology and the pumped hydro storage technology are very suitable for load management as long as the geology is available and response time in the order of minutes is acceptable.

How Compressed Air Energy Storage (CAES) could contribute to socio-economic development and environmental protection

A California Public Utilities Commission (CPUC) 2010 study details on the economic benefits of CAES technology. The study notes that economic benefits mainly occur from energy bill savings, lower future energy storage costs as the market matures and employment and other economic growth opportunities.

Energy storage enables customers to change when they draw power from the grid to meet their demand. For customers on dynamic rates energy storage allows energy arbitrage opportunities. In other words, customers that pay flexible rates based on the time of purchase of electricity energy storage allows for energy bill savings due to shifting the timing when energy is drawn from the grid. The energy storage system charges when the cost of energy is low and discharges when the cost of energy is high. As such, the installation is able to provide economic benefits to its owner.

It is expected that the energy storage market will mature, especially driven by the increasing implementation of intermittent renewable energy technologies. As such, while the energy storage technology market is currently an emerging market, it is expected that costs will be lower in the future as a result of learning-by-doing. Economies of scale will be developed and additional research and development is also expected to further lower the costs of energy storage technologies. Adding the expected rise in energy costs over time, energy storage technologies are likely to become important technologies in the future. Policymakers will need to consider these market transformations.

Energy storage technologies will provide employment and other economic growth opportunities. Energy storage technologies are currenlty not uniformly deployed, but will create jobs in manufacturing and installation as the technology market penetration expands. In addition, through energy grid stabilitzation and smoothening, the technology is expected to support economic growth objectives.  

Socio-economic development is further supported through the technical benefits the energy storage technology offers. A 2008 National Energy Technology Laboratory study on the market of emerging electric energy storage systems provides extensive details on the technical benefits provided by energy storage technologies in general, and for emerging electric energy storage systems in particular. This section focuses on the technical benefits provided by CAES technology, although several benefits also apply to other energy storage technologies.

Energy storage technologies, through drawing energy and supplying energy to the grid at chosen times, can support grid stabilization. The energy grid can destabilize after a disturbance, and the stored energy can support stabilization efforts. For instance, in the case  of a high power peak in the grid, energy storage technologies can store the energy and release it more gradually into the grid. Alternatively, in the case of a sudden drop in power on the grid, energy storage technologies can provide energy to the grid. In the case of CAES technology, this benefit is only really practical if the drop in power or the surge in power is expected to continue for longer time periods as CAES technology is not very suitable for very fast discharges. Instead, CAES technology can provide prolonged discharges. The NETL (2008) study notes that energy storage technologies in general can remedy three forms of grid instability: rotor angle instability; voltage instability and frequency excursions.  

Energy storage technologies can be used to support the normal operations of the grid, and as such provide grid operational support. Grid operational support can be divided in four types of support operations:

  1. Frequency regulation services: energy storage can be used to inject and absorb power to maintain grid frequency in the face of fluctuations in generation and load.
  2. Contingency reserves: at the transmission level, contingency reserve includes spinning and supplemental reserve units, that provide power for up to two hours in response to a sudden loss of generation or a transmission outage.
  3. Voltage support: energy storage can support the injection or absorption of reactive power into the grid to maintain system voltage within the optimal range. Energy storage systems use power-conditioning electronics to convert the power output of the storage technology to the appropriate voltage and frequency for the grid.
  4. Black start: black start units provide the ability to start up from a shutdown condition without support from the grid, and then energize the grid to allow other units to start up. A properly sized energy storage system can provide black start capabilities. 

Moreover, energy storage technologies can improve power quality and reliability. However, since the vast majority of grid-related power quality events are voltage sags and interruptions with durations of less than two seconds, CAES technology is not very suitable for this function. Instead, superconducting magnetic energy storage (SMES) or capacitors are more suitable.

One function the Compressed Air Energy Storage (CAES) technology is very good at is load shifting. Load shifting is achieved by storing energy during periods of low demand and releasing the stored energy during periods of high demand. The NETL (2008) study notes that load shifting comes in several different forms. The most common of these forms, in which CAES technology can be suitably applied, is peak shaving. Peak shaving describes the use of energy storage to reduce peak demand in an area. It is usually proposed when the peak demand for a system is much higher than the average load, and when the peak demand occurs relatively rarely. As such, capacity upgrades are very expensive as they permanently upgrade the grid's capacity in order to tackle rare peak demand events. Peak shaving allows a utility to defer the investment required to upgrade the capacity of the grid. The EPRI (2003) study notes that the economic viability of energy storage for peak shaving depends on several factors, particularly the rate of load growth. Fast load growth improves the economic viability of capacity upgrades as the rare events are likely to become increasingly more common as load grows. In contrast, low load growth improves the economic viability of energy storage technologies as the rare events need to be addressed, and energy storage is suitable for addressing rare and infrequent peak demand through peak shaving.

A key characteristic of energy storage technologies is the capacity to support the integration of renewable energy sources. With wind power currently being the largest and fastest growing renewable power source, and solar PV and CSP expected to play increasingly more substantial roles in the energy grid, this is an important characteristic. The following applications for energy storage technologies are described in the context of wind power. Similar applications also exist for other renewables such as PV.

  • Frequency and synchronous spinning reserve support: In grids with a significant share of wind generation, intermittency and variability in wind generation output due to sudden shifts in wind patterns can lead to significant imbalances between generation and load that in turn result in shifts in grid frequency. Such imbalances are usually handled by spinning reserve at the transmission level, but energy storage can provide prompt response to such imbalances without the emissions related to most conventional solutions. As mentioned, CAES technology is not very suitable for fast-discharge.
  • Transmission Curtailment Reduction: Wind power generation is often located in remote areas that are poorly served by transmission and distribution systems. As a result, sometimes wind operators are asked to curtail their production, which results in lost energy production opportunity, or system operators are required to invest in expanding the transmission capability. An energy storage unit located close to the wind generation can allow the excess energy to be stored and then delivered at times when the transmission system is not congested. CAES technology is very suitable for this application.
  • Time Shifting: Wind turbines are considered as non-dispatchable resources. Energy storage can be used to store energy generated during periods of low demand and deliver it during periods of high demand. When applied to wind generation, this application is sometimes called “firming and shaping” because it changes the power profile of the wind to allow greater control over dispatch.

Environmental protection benefits occur due to the socio-economic benefits mentioned above. Peak shaving and other technical benefits result in lower emissions of greenhouse gases and other emissions, energy market support functions delay energy grid expansions which saves natural resources, and the storage capacity provided by the technology delays energy power supply expansions which saves both natural resources and reduces emissions from power production. In addition, as renewables like wind increase as a percentage of the off-peak power mix, the emissions benefits of EES will continue to grow.

Financial requirements and costs

The CAES plant is the only technology that can provide significant energy storage (in the thousands of MWhs) at relatively low costs (approximately $400 to $500/kW ). The plant has practically unlimited flexibility for providing significant load management at the utility or regional levels.

The CAES cost curve is not straight because it has a significant per-kWh operating cost (it requires natural gas fuel). While the other energy storage technologies' costs are almost completely dependent on installed capacity, the CAES cost depends on both installed capacity and the amount of energy that passes through storage (Schwyzer, 2006).

Capital costs

The capital cost of a CAES plant is a function of the storage medium, the plant capacity (power), and the energy stored in the storage medium. (EPRI, 2002).

Table 3. CAES Plant Costs For Various Storage Media And Plant Configurations. Source: EPRI, 2002

Storage medium for CAES plant Size (MWe) Cost for power related plant components ($/kW) Cost for the energy storage components ($/kWh) Typical hours of storage for a plant Total capital costs ($/kWe)
Salt 200 350 1 10 360
Porous media 200 350 0.10 10 351
Hard rock (new cavern) 200 350 30 10 650
Surface piping 50 350 30 3 440

Operating costs

The 2002 EPRI study identifies the following rule of thumb for a generic CAES plant: The operating cost per kWh delivered during power generation mode is 0.75 times that of the incremental cost per kWh of off-peak power purchased during the compression mode, plus the cost of the fuel (in $/MMBTU) times 4000 BTU/kWH generated.

Illustrated in a formula:

Cost of electricity generated ($/kWh) = (0.75) (Incremental cost of electricity purchased, $/kWh) + (Cost of fuel purchased, $/MMBtu) (4,000 Btu/kWh) / (1,000,000 Btu/MMBtu)

The factor “0.75” includes the ratio of generated electricity to purchased electricity and the energy lost to pipe friction, air leakage, pressure regulation, and compressor/expander component efficiencies. The heat rate of 4,000 Btu/kWh is typical for an expander-generator set operating without the compressor during the generation mode.


  • EPRI, 2002. Handbook for Energy Storage for Transmission or Distribution Applications. Report No. 1007189. Technical Update December 2002. Document can be found at:
  • NETL, 2008. Market Analysis of Emerging Electric Energy Storage Systems. National energy technology laboratory and Department of Energy report with code DOE/NETL-2008/1330 of July 31, 2008. Document can be found online at:
  • Schoenung, 2001. Characteristics and technologies for long vs short term energy storage. A study by the U.S. department of energy (DOE) Energy Storage Systems Program. A SANDIA report with code SAND2001-0765. Document can be found online at:
  • CPUC, 2010. Electric Energy Storage: An Assessment of Potential Barriers and Opportunities. A Policy and Planning Division White Paper of the California Public Utilities Commission. Document can be found online at:
  • Schwyzer, 2006. “The Potential of Wind Power and Energy Storage in California,” Diana Schwyzer, Masters Thesis for Energy and Resources Group at UC Berkeley. November 2006. Document can be found online at:
  • APS, 2007. Challenges of Electric Energy Storage Technologies: A Report from the APS Panel on Public Affairs Committee on Energy and Environment. Document can be found online at: