Due to its relatively high efficiency, Distributed Generation (DG) is widely used to supply energy sources (generally power, heating and cooling) for on-site needs. This, however, presents a challenge to deal with an abrupt increase of electricity demand. To satisfy 100% of electricity demand with a high level dynamic performance energy storage is one of the most promising options for the DG system. In this study a hybrid DG system integrated with Compressed Air Energy Storage (CAES) and Thermal Energy Storage (TES) is proposed. Coupled with energy storage the DG system can perform a 'peak shaving' function and maintain the power output requirement properly, resulting in a lower core engine power rating and better process efficiency. To carry out technical evaluation the process flow chart is created and process models are developed. The results of simulation are also validated by IET's CAES experimental data. The results reveal that the hybrid system's exergy efficiency is 41.5%, and the primary fuel saving ratio is 23.13%. The CAES expander system is operated in a sliding pressure mode, satisfying various load profiles while its exergy efficiency for one day cycle is 64.7%. Compared with conventional DG system, within the hybrid system the core engine size can be downgraded by 35.3%, the fuel saving ratio is 11.06%. (C) 2017 Elsevier Ltd. All rights reserved.