Energy storage systems are becoming more important for load leveling, especially for widespread use of intermittent renewable energy. Compressed air energy storage (CAES) is one of the promising methods for energy storage, but large scale CAES are dependent on the suitable underground geology. Micro-CAES with man-made air vessel is a more adaptable solution for distributed future power networks. In this paper, energy and exergy analyses of the micro-CAES system are performed and to improve the efficiency of the system, some innovative ideas are introduced. The results shows that micro-CAES system could be a very effective system for distributed power networks as a combination of energy storage, generation with various heat sources, and air-cycle heating and cooling system, with a fairly good energy density and efficiency. Quasi-isothermal compression and expansion concepts result in the best exergy efficiencies.