The objective of this study was to perform a conceptual engineering design and evaluation study and to develop a design for an adiabatic CAES system using water-compensated hard rock caverns for compressed air storage. The conceptual plant design was to feature underground containment for thermal energy storage and water-compensated hard rock caverns for high pressure air storage. Other design constraints included the selection of turbomachinery designs that would require little development and would therefore be available for near-term plant construction and demonstration. The design was to be based upon the DOE/EPRI/PEPCO-funded 231 MW/unit conventional CAES plant design prepared for a site in Maryland. This report summarizes the project, its findings, and the recommendations of the study team; presents the development and optimization of the plant heat cycle and the selection and thermal design of the thermal energy storage system; discusses the selection of turbomachinery and estimated plant performance and operational capability; describes the control system concept; and presents the conceptual design of the adiabatic CAES plant, the cost estimates and economic evaluation, and an assessment of technical and economic feasibility. Particular areas in the plant design requiring further development or investigation are discussed. It is concluded that the adiabatic concept more » appears to be the most attractive candidate for utility application in the near future. It is operationally viable, economically attractive compared with competing concerns, and will require relatively little development before the construction of a plant can be undertaken. It is estimated that a utility could start the design of a demonstration plant in 2 to 3 years if research regarding TES system design is undertaken in a timely manner. (LCL) « less