With the increasing penetration of renewable energy into energy market, it is urgent to solve the problem of fluctuations of renewable energy sources (RES). Energy storage technology is regarded as one method to cope with the unstable nature of RES. One of these technologies is compressed air energy storage (CAES), which is a modification of the basic gas turbine technology. Electric power supplied by CAES can meet peak-load requirement of electric utility systems. Because there is heat waste in the existing CAES systems during compression process, fossil fuels are used to improve the expansion work to generate peak power. In order to avoid the use of fuels and keep high efficiency of system, CAES system with thermal energy storage (TES) is designed to capture and reuse the compressed air heat. This paper uses a thermodynamic model of a CAES system with TES to analyze the effect of TES on system efficiency. Besides, this paper evaluates the influence of temperature and pressure on the utilization of heat in TES. Results show that even when power efficiency reaches maximum, there is still a proportion of thermal energy left in TES for other use. Meanwhile, the utilization of heat in TES can be affected by pressure in the air storage chamber. With appropriate selection of pressure limits, the utilization of compressed air heat can be optimized. (C) 2012 Elsevier Ltd. All rights reserved.