The invention relates to a method and apparatus for using solar energy to enhance the efficiency of a compressed air energy storage system (and visa-versa). The apparatus comprises a photovoltaic panel to drive a compressor, which provides compressed air energy into an inner vessel housed within a storage tank. Two solar receiving panels are used to heat water which can be circulated and stored within an annulus surrounding the inner vessel, wherein the heated water can help regulate the temperature of the compressed air within the tank. This way, when air is released using a turbo expander, any excess temperature drops that can otherwise result from air expansion can be avoided. The overall system efficiency is enhanced by the chilled air by-product of the turbo expander which is used to generate more electrical power from an associated fuel-driven generator set, and/or by the waste heat from the compressor and from the generator set exhaust which is used in a Combined Heat and Power system (CHP) to power either a steam-driven generator set or an absorption chiller.